Mortgage Introducer September 2023

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Managing editor Paul Lucas paul.lucas@keymedia.com

Editor Simon Meadows simon.meadows@keymedia.com

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Chris Anderson

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Content editor Kel Pero

Designer Joenel Salvador

President, Tim Duce Director, people and culture, Julia Bookallil

HR business partner, Alisha Lomas-Oliver

Chief information officer, Colin Chan

Chief revenue officer, Dane Taylor CEO, Mike Shipley

COO, George Walmsley

Past, present, and future ... tense?

One of my favourite expressions is, “The past is a foreign country; they do things differently there.”

It’s a quotation from The GoBetween, a 1953 novel by L.P. Hartley, and it truly strikes a chord with me.

It occurs to me that in the mortgage industry there is a lot of taking stock – be it looking back to previous times, or appraising what’s currently going on, as well as looking forward to the future of the market.

The past, present, and future can be regarded as countries of their own – and vast continents in some cases.

I was reminded of this recently, when it was noted by various media outlets that it had been a whole year since Liz Truss walked into Downing Street as our new prime minister. The fallout from her short reign at the top of government and her chancellor Kwasi Kwarteng’s ill-fated mini budget sent shockwaves through the mortgage industry, of course.

It feels like mortgage professionals have been picking up the pieces, and consumers counting the cost, ever since. Short her premiership may have been, but the impact of it has resonated over the past twelve months. With attention already turning to the next general election, who knows where we will be in another year?

In this edition of Mortgage Introducer, there is plenty of back-andforth among the past, present, and future.

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We profile the industry icon Peter Brodnicki, CEO of Mortgage Advice Bureau (MAB), who in our exclusive interview looks back on his career in depth, revealing how his father influenced him in business. He explains, too, why, far from wanting to retire, he has more to achieve, and is focused on the future of MAB.

John Doughty, a managing director at Just Mortgages, considers the present and future, explaining why this is a time for brokers to shine, and his company colleague Matt Tilbury looks to the past, to recount the first mortgage deal of his career ... it’s a fishy tale you won’t want to miss.

In the present, Mortgage Introducer’s special feature, 2023 Top Mortgage Employers, appraises the best mortgage businesses to work for in the UK. Finally, Lorenzo Satchell, sales director for bridging at Hampshire Trust Bank, takes stock of his time in financial services, while sharing his insightful take on the current specialist market. Whichever tense you’re currently focused on ... enjoy the magazine!

Simon Meadows

Lending market review

significantly higher than any quarter in the four years preceding 2021, three of which pre-dated the pandemic.

regions in the 12 months to June 2023 (4.7 per cent), while London saw the lowest (negative 0.6 per cent).

Time and time again we’ve heard about the strength and resilience associated with the UK housing and mortgage markets, and time and time again this strength and resilience have helped these markets to overcome various challenges. However, a factor that can often be overlooked within this is the role of the intermediary and the advice process in helping to ensure that potential homeowners have sufficient access to an appropriate, responsible, and competitive set ofv solutions.

UPBEAT MARKET SENTIMENT

It was encouraging to see the Intermediary Mortgage Lenders Association’s (IMLA’s) latest Mortgage Market Tracker reveal “surprisingly upbeat market sentiment” among advisers in Q2 2023, although the data indicates growing caution about the outlook for the sector.

Overall, 75 per cent of advisers described themselves as “confident” about the mortgage market, but the proportion of those who were “very confident” fell from 26 per cent in April to 20 per cent in June, while the percentage of those who felt “fairly confident” fell from 56 per cent to 40 per cent over the same period.

IMLA’s research also showed that intermediaries are maintaining healthy business volumes, with the average adviser placing 93 cases over the previous 12 months. This figure is slightly lower than Q2 2022 (97 cases) and Q2 2021 (95 cases), but

In addition, the average number of decisions in principle (DIPs) that intermediaries processed stabilised in Q2, have fallen for the five preceding quarters. On average, intermediaries dealt with 25 DIPs in Q2, up two on Q1 2023 to represent the first quarterly increase since Q1 2022.

In the commentary around these findings, it was also interesting to see IMLA repeat its prediction that intermediaries could account for 90 per cent of mortgage distribution by 2024. As a lender who remains committed to the intermediary market, we find that the reiteration of this forecast comes as no great surprise and serves to highlight the value of the advice process, the reach of individual advisers, and the impact they are having on a variety of borrowers across the UK in what remains an uncertain economic climate.

THE HOUSING MARKET

Moving on to the housing market, conditions remained “steady,” with average UK house prices increasing by 1.7per cent in the 12 months to June, down from 1.8 per cent in May. This is according to the latest UK House Price Index from the Office for National Statistics (ONS) and the Land Registry, which reported that the average UK house price was £288,000 in June, £5,000 higher than 12 months before, but £5,000 below the recent peak in November 2022.

On a national and regional basis, average house prices increased over the 12 months by 1.9 per cent in England, 0.6 per cent in Wales, and 2.7 per cent in Northern Ireland, while average Scotland house prices remained largely unchanged. The North East saw the highest annual percentage change of all English

On a seasonally adjusted basis, the average UK house price increased by 0.3 per cent in June, following a month-on-month decrease of 0.3 per cent in May. On a non-seasonally adjusted basis, prices increased by 0.7 per cent in June, following a month-on-month increase of 0.2 per cent in May.

THE MORTGAGE CHARTER AND INTEREST-ONLY

Following the announcement of the Mortgage Charter in late June, it was interesting to see data from Legal & General’s Ignite platform draw attention to a notable spike in searches for interest-only mortgages.

Searches for this product type jumped by 11 per cent from June to July, following a 53 per cent increase from May to June. This spike coincided with the announcement of the Mortgage Charter by chancellor Jeremy Hunt, on 26 June to support borrowers struggling to meet mortgage repayments.

Now, borrowers can contact their lenders to discuss options without it affecting their credit score, switch rates up to six months ahead of their current rate expiring, and opt to pay only the interest due for a six-month period.

As a lender who signed up to this charter from the off, we will continue to assist mortgage customers who may be worried or experiencing financial difficulty when and where we can, and will also help our intermediary partners to convey the right messaging and get access to a robust support network.

As the mortgage market continues to evolve, so too does the way in which we service and support our intermediary partners and our customers. M I

Sidney Wager head of intermediary market development, Barclays

Reasons to be cheerful

which were before the pandemic, when we might suggest there was a more “normal” environment.

individual to go it alone rather than using the services of an adviser.

In an economic environment in which inflation – particularly core inflation – remains stubbornly high, and where the likelihood of further increases to the Bank Base Rate (BBR) as a result appear to be inevitable, it might seem very easy to be completely downbeat about the mortgage market, consumer engagement, activity levels, and confidence for the future.

However, if recent research from the Intermediary Mortgage Lenders Association (IMLA) is to be believed, then the vast majority of those at the coalface of the mortgage market, namely advisers, appear not to hold a negative view about the present moment or the future.

Indeed, IMLA’s latest Mortgage Market Tracker report contains a significant number of upbeat statistics and assessments from mortgage advisers, which I think go a long way toward revealing a situation in which advice, in particular, is needed more than ever before.

Seventy-five per cent of advisers polled by IMLA describe themselves as “confident” about the mortgage market, and while there has been a slight drop in those describing themselves as either “very confident” or “fairly confident,” this is still clearly a very strong figure.

That confidence is reflected in business volume numbers, with the average adviser placing 93 cases over the previous 12 months – again, only slightly down on the corresponding quarters in 2022 (97 cases) and 2021 (95 cases).

However, as the research points out, this number – 93 – is significantly higher than in any previous quarter in the four years prior to 2021, three of

The current UK mortgage market is turbulent, to say the least. Product price changes, criteria shifts, withdrawals and the like are much more prevalent now than in the benign rate environment we enjoyed over the last decade or so.

It’s clear that, as a result, borrowers are less confident about finding the most suitable mortgage. In a mortgage market that isn’t subject to shifts and quick moves, consumers and borrowers might feel that they’re unlikely to pick a product themselves that is going to be completely wrong for them. Now, that feeling of getting it wrong must be heightened by all the change.

It’s therefore fair to say that the need for advice has grown with this market turbulence, and that the only way consumers can have faith in what they are able to secure is via an adviser, who can not only help them initially, but will be able to track the market and secure them a more suitable product should the opportunity arise.

That will be a big focus for consumers, who will undoubtedly be reading headlines about rate moves, price changes, and products being pulled at very short notice, and are probably wondering how they can protect themselves in this market.

We’ve already seen a significant number of fingers being burnt in a mortgage-rate environment that can switch rapidly. How many borrowers opted for long-term fixes in the postmini budget days, only to see rates calm in the weeks after? The same could be said for a number of different periods since then, as the money markets – and lenders – reacted to the inflation figures, and, as we saw, product rates shifted upward in double-quick time.

As mentioned, this type of market movement makes the whole mortgage question for consumers much more complicated and fraught, and it would probably take a very confident

And, of course, the outlook for mortgage products/pricing doesn’t appear to be any different in the months, perhaps years, ahead. The most recent inflation figures (for July) precipitated further moves upward in swap rates, after a few weeks when mortgage product rates appeared to be coming down, and there is an expectation that the BBR will be moved up again before it can come down.

At the same time, how might lenders react? They still need volume and pipeline business, so product rates might not actually go up. This is a complex picture for even industry practitioners like us, let alone Joe Public.

This being the case, you can see why advisers are still optimistic and upbeat, and you can see why the resilience of the sector – even in the face of what looks like strong headwinds – is still something to behold, and is likely to mean the intermediary market will up its distribution market share in the years ahead.

Last year IMLA suggested it might even hit 90 per cent of all mortgages sold in 2024, and with greater complexity and change, you would not bet against this being the case.

What we do know is that advisers should be seeking to make the most of this market situation, and highlighting how important advice is within these circumstances. Not just, of course, in terms of picking the right product, but also the protections that come with professional advice, such as access to FOS and FSCS, which are simply not available should consumers decide to secure a product themselves.

Overall, there are plenty of marketing messages available to the advisory profession at the moment, particularly when there will be a heightened sense of worry about what is attainable and accessible within today’s mortgage market. We should not be afraid to make the most of these. M I

Bob Hunt chief executive, Paradigm Mortgage Services

Leave clients in no doubt who should be servicing their mortgage needs

has been so tumultuous.

To say that the mortgage market and the options it currently has available to all types of borrowers are something of a national obsession right now would, I think, be a slight understatement.

First-time buyers will be looking at the current market and wondering why they waited till now to try to buy rather than doing it a couple of years ago, but it is perhaps existing borrowers coming to the end of their deals in 2023 and 2024 who will be feeling the discomfort the most and potentially wondering how they will find the extra money required to fund their monthly mortgage payments given the current rates available.

The fate of existing borrowers and, specifically, the difference in mortgage payments they might have to stomach compared to their last mortgage deal has been a heavily politicised topic of conversation in recent weeks, and is likely to remain so for some time.

Indeed, I think most advisers would argue that previous governments of all hues have been very keen to talk to the big mortgage banks and lenders, but perhaps have paid too little notice to those who are on the front line in trying to find the right solutions for borrowers, particularly over the last 12 to 18 months, when the mortgage market

You might well argue that advisers have been overlooked or, perhaps, not listened to even though it is they who are having to find the right product solutions, who are having to meet the higher affordability obstacles, and who are having to explain why rates now start with a five or a six, rather than the one or two of yesteryear.

Plus, of course, it is they who also have to deal with lender service issues and delays, very short-notice product withdrawals, and clients who may well be somewhat bewildered at the rate of change and the lack of time they appear to have in terms of deciding which recommended product to choose.

However, at the same time, it is this remortgage/product transfer (PT) sector that is perhaps the most important to advisers, given the sheer number of borrowers who come off previous deals each month, but also in terms of what it allows advisers to cover – financial wants and needs beyond the mortgage, and therefore the opportunity to save clients money in other areas but, crucially, earn income across multiple recommendations.

It’s for this very reason we have a specific Remortgage & Product Transfer Hub for member firms, with sales guides and aids, resources, and specific lender criteria information, all designed to be a one-stop shop for advisers dealing with existing clients coming to the ends of their deals.

Of course, we all know how important this recurring business is. We also recognise the fact that clients expect constant communication from

their advisers to make them aware of their situation and what might be available to them. On top of that, an adviser has to compete with the existing lender, who is now much more likely to contact borrowers four, five, or six months in advance of the end of their deals, offering them PT rates.

To help in this regard, our advisory firms can use the remortgage review module within The Key, which identifies cases due for review, provides an indicative price for a replacement product (where possible), and emails the client directly to initiate contact.

That continued focus on the remortgage options available to them is vital, especially in a marketplace where many borrowers might feel they only have PTs from their existing lender to fall back on. Advisers know only too well that income generated from PT business is far less than a remortgage, and therefore presenting available options from other lenders at an early stage should signal to the customer that they do have a greater degree of choice than they might think.

In a marketplace where purchase business is not the force it was two or three years ago, existing clients and borrowers assume an increased importance. And they genuinely want advisers to contact them and spell out the market choices they have; after all, they were confident in your service last time ‘round. There’s no excuse for not letting them know you can provide the same again – in fact, they should have no doubt who should be servicing their mortgage needs this, or indeed any, time. M I

Anita White head of lending, The Right Mortgage & Protection Network

Are we finally seeing the top of the inflation spike?

Shaun Almond MD, HL Partnership

With the unexpected but welcome inflation fall, some lenders have announced cuts to their fixed rates. These decreases are the first sign that we have reached the high point of interest rate rises. At time of writing, Moneyfacts reported that the average rate on a new two-year fixedrate deal was 6.79 per cent to 80 per cent LTV. Meanwhile, a typical rate on a new five -year fixed was down to 6.03 per cent to 80 per cent LTV.

Of course, as they say in the country, “A single swallow does not a summer make,” and these moves are, at this stage, no more than a testing of the waters. For these falls to start a definite trend depends largely on the Bank of England (BoE) deciding that inflation has indeed peaked and not raising interest rates again.

The recent drop in recorded inflation gives us hope that the worst is behind us and, if it is, it will come as welcome relief to the many thousands who are looking at big increases in their monthly payments as their current fixed-rate deals end. However, it is still too early to tell whether we have reached the peak of interest rate rises.

The BoE is under pressure not to raise interest rates too high for fear of tipping the country into recession. This message comes from, among others, a former governor of the bank, who said that the monetary policy committee (MPC) could tighten policy too much if they push for further rate increases, which in turn could trigger a recession.

The result of the aggressive BoE

interest rate rises is shown in the pressure put on homeowners who face a potential doubling of their repayments when their current fixed rate expires. On top of that, some economists have predicted unemployment could increase next year as more businesses fail and job vacancies fall.

Clearly, the BoE, through the MPC, is in a difficult position. On the one hand, it has a duty to combat inflation by controlling interest rates, but on the other, it runs the risk of kickstarting a recessionary cycle, which is not an outcome that anyone would want to see. With the benefit of hindsight, the BoE could have acted sooner to raise interest rates when the evidence at the time suggested a steep rise in inflation was imminent, before it jumped to more than 10 per cent in 2022. However, we are where we are.

If we take a positive stance, it would be plausible to hope that, having raised interest rates as far as the BoE has, we are now seeing the first evidence that the inflationary spiral is indeed

running out of steam – and that, if the BoE refrains from adding to more than twelve months of rises, inflation may continue to fall. The alternative view would be that inflation is not beaten and we should guard against a false dawn and continue to batten down the hatches.

25-YEAR MORTGAGES, ANYONE?

Yes, they have been around for a while now, but are they the answer for homeowners looking for stability of mortgage repayments during their mortgage term, given the turmoil in the market? Secretary of State for Levelling Up, Housing and Communities Michael Gove is defi nitely of the opinion that longer terms offer borrowers greater certainty regarding their home-loan payments. Admittedly, it has not yet become government policy, but, looking at the pros and cons, it is clear that many people will want to give longer-term mortgages greater scrutiny.

Much more common on the continent and in the United States, 25and 30-year terms have only become part of the mortgage landscape in the UK in recent years because of issues stemming from affordability and making incomes stretch farther. They still make up only a tiny percentage of new mortgages. In the UK, we have been wedded to much shorter, fixedrate terms, which have tended to be cheaper and more flexible than longerterm offerings. So, whilst the idea of having a long-term fixed rate that clients can rely on would be comforting for them in times of rate volatility, being unable, for twenty-plus years, to switch from a locked-in rate that would have been considered high just a year ago without paying swingeing redemption penalties is not the answer – at least not without substantial modifications.

How artificial intelligence can support the development of mortgage advisers

for a new qualification, the learning platform will be able to adjust the difficulty of the questions and learning materials based on your performance to ensure you are challenged but not overwhelmed.

According to Goldman Sachs, artificial intelligence (AI) could affect up to 300m jobs with its ability to automate many of the tasks that form a key part of these roles. So how should mortgage advisers be preparing for this new age?

AI AND THE ROLE OF THE FINANCIAL AND MORTGAGE ADVISER

As impressive as AI may appear, there are many reasons why it won’t replace the need for human advice. The most obvious of these is that AI cannot replicate human traits such as creativity or empathy.

AI is already transforming many aspects of our lives, including learning and development. This is an area in which advisers are likely to see significant changes. AI technologies have the potential to revolutionise the way we learn, making education more personalized, adaptive, and effective. Once again, this is only likely to benefit advisers looking to acquire new skills and expertise.

HOW AI CAN HELP MORTGAGE ADVISERS WITH LEARNING AND DEVELOPMENT

AI algorithms, which are essentially a process or set of rules, mean educational software can analyse the learning needs of each student and tailor their experience accordingly. For example, if you are studying

AI can also provide more accurate and timely feedback on students’ performance, which can help identify areas for development and provide targeted interventions. This means that AI-powered assessment tools can analyse your academic work and provide immediate feedback on things like grammar, spelling, and coherence. It can also be used in the same way to analyse your written customer communications.

AI also has the potential to democratize learning by making AI-powered learning platforms more accessible to learners in remote or underserved areas. For students who do not have access to a trainer or coach, AI-powered tutoring apps can provide personalised instructions, communicated in a way they can understand. Additionally, AI can help create inclusive learning demands that account for neurodiversity.

IS THERE INHERENT BIAS IN AI?

There is potential for bias in AI algorithms, as these can only reflect the data on which they are based; if the original data contains any biases, these are likely to be reproduced and even amplified. For example, if an AI algorithm is based on data that reflects gender or racial biases, it may replicate those biases when making decisions about learners. Addressing this issue will be critical in ensuring that AIpowered learning is fair and equitable to all.

Interestingly, the same issue applies

to mortgage advice, and illustrates why human intervention will always be required. Without it, the “rules” that identify the right solutions will only be based on existing data – that is, on what’s gone before – and will not necessarily pick up the subtle nuances that often make up our preferences and priorities.

WILL AI REPLACE HUMAN TEACHERS AND TRAINERS?

Whilst AI can provide tailored learning experiences, accurate and objective assessments, and engaging study materials, it cannot replace the human touch that is essential to learning and development. Just as you, as a mortgage adviser, provide emotional support, motivation, and real-world insight to your customers, so too do teachers to their students – and that is something AI cannot replicate. For AI to be fully effective, it should be used to augment or complement trainers, rather than replace them.

HOW AI IS TRANSFORMING THE WAY WE WORK – AND THE WAY WE LEARN

AI is transforming both the way in which you will provide advice and the way in which you will develop your skills and knowledge. Your learning experience will become more personal, accessible, convenient, and efficient. However, there are still challenges and risks, and there are elements of human-to-human training that aren’t likely ever to be fully replaced.

Overall, the benefits of AI are likely to outweigh the challenges and risks significantly – and it will enable you to focus your time and skills on providing great service to your customers. M I

Gordon Reid business and development manager, London Institute of Banking & Finance

Large loans are part of the solution for this large problem

Michael Conville chief customer officer, Newcastle Building Society

When we think about the cost-of-living crisis, the plight of those whose homes are worth over a million pounds isn’t usually front of mind. Compared to families struggling with rising rent, energy bills, and exorbitant grocery prices, it might seem insensitive to suggest that any hardship exists for these people at all.

Yet it bears rather more careful thought. Stubborn inflation and the incessant rise in interest rates do eventually affect these families.

Curbing inflation is not about inflicting maximum pain on the country’s poorest, even though they will feel it most – precisely why cost-of-living support payments are so crucial.

As mortgage rates have risen and fixed terms have ended, middleincome families and individuals have really begun to understand what the higher cost of living means. Soaring energy bills have cut into their disposable income and the weekly food shop has resulted in many a dropped jaw.

However, rising mortgage costs are much less easy to absorb.

Don’t get me wrong – the financial squeeze on those fortunate enough to afford a very comfortable lifestyle is anything but crippling. These people have discretionary spending that can be cut down to free up thousands of pounds. What I’m emphasising is that, just as a goldfish grows to the size of its tank, people’s spending tends to match their income.

So, what are their options? Yes, they could sell their houses, their cars, or they could move to cheaper areas and smaller homes. In theory, it sounds simple, but in practice it isn’t. Who wants to move away from family, a convenient work commute, or an area where children are settled in school and all their friends live? The real question, then, is how families in this position deal with their mortgage rate rising from two per cent to six per cent – and there are a lot of them.

Research published in February by estate agent Savills calculates that there are currently 730,390 homes valued at £1 million or more across Britain. This equates to one in 40, and represents a small but significant 2.5 per cent of all housing stock in the country. While many of these properties will be mortgage-free, a significant number won’t be, and it’s likely that in the coming years this market will grow, even with higher interest rates and reduced affordability. Savills’ analysis shows that last year alone, more than 40,000 additional homes crossed the million-pound threshold. An £800,000 mortgage taken on a two per cent fixed rate would result in monthly repayments of £3,390. Remortgage this at six per cent, and monthly payments rise to £5,154.

That is significant, and because of the size of the loan, the higher interest rate is proportionately more painful. In very real terms, it’s a highly concerning problem to have. And it isn’t just frightening for those facing a crashing adjustment in the way their families have spent and lived over the past decade.

We should all be worried, because if these people fall over financially, the domino effect on the rest of the housing market will be serious. A well-functioning market, irrespective of its nature, thrives through diversity.

The UK housing market is no different. This means that, as well as supporting those with the biggest financial difficulties and lowest household capital, we must support the more affluent as well. That doesn’t mean bailouts, but rather, it highlights the need for lenders to consider the affordability of borrowers with substantial mortgages.

We know lenders have to play their part and have a large-loan proposition as part of that solution, as it’s clear that the volume and nature of largeloan lending are changing. This is a good thing, as it means we, as an industry, are keeping pace with the market. Many lenders can consider loans of over £10 million, for example. However, this activity at the very top end of the market only serves to make the point that large-loan propositions that service the £1 million, £2 million, or even £3 million markets are incredibly important. Brokers and their clients need the same levels of service and expertise that one might traditionally expect of more conventional smaller-loan lending.

We work hard to deliver a level of expertise that reflects the individual care and personal service that this kind of lending demands.

The market is a prime example of where lenders must not overlook their duty to the customer. A good outcome for borrowers at both ends of the value scale is to be able to continue paying their mortgage in full and on time. That means adjusting rates and underwriting to align with customers’ needs and provide support as they navigate whatever financial adjustments are required. M I

1 https://www.savills.co.uk/insightand-opinion/savills-news/339380-0/1in-40-homes-now-valued-%C2%A31million-or-more--according-to-savills

New mortgage propositions are coming

as it is they who ramped up their borrowing to the absolute max in order to afford the status home.

According to the Financial Conduct Authority (FCA), “A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care.

“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.”

Welcome to a brave new world. Far from being flippant, I’m serious. The cost-of-living crisis, inflation in double digits for the best part of a year, the slow but steady rise in the base rate –there is a very real cost to all this.

So much is said about the immediacy of monthly mortgage repayments jumping by hundreds of pounds overnight when fixed-rate deals expire, leaving vulnerable families facing stark financial choices that could, in a worstcase scenario, result in temporary social housing accommodation or even homelessness.

It’s real, it hurts. But it’s not affecting just those who survive on benefits or low or stretched incomes.

This is hurting the middle classes, too – possibly the higher-earning middle classes even more than most,

The rising cost of living and its effect on the standard of living are absolutely the worst for the lowest-income families and individuals in the country. In some cases, the consequences are bordering on inhumane. That crisis is not the only one, however.

Paring it back to the basics, the Bank of England arguably kept the base rate far too low for far too long. Aside from a cocktail of exacerbating external factors – a global pandemic, supplychain disruption, Russia’s decision to invade Ukraine and cut off energy supplies to Western Europe – inflation over the bank’s two per cent target was eminently foreseeable.

What has gone before, though, matters less than what happens next. And the introduction of the Financial Conduct Authority’s consumer duty rules on 31 July has made things a lot more complicated for lenders on that front.

The rule, as you no doubt know, is all about 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 policy. “As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.”

As is ever the case, the intention of this regulation is to offer greater protection to consumers. As is usually also the case, there are unintended consequences. Already, the majority of lenders are bracing for 2024. There may be some respite – inflation is finally coming down and is set to stabilise over the next six months.

But arrears are expected to grow, and initial signs of distress are already visible. Lenders are cognisant that the regulator expects forbearance and leniency where consumers are under duress through little fault of their own.

But when does forbearance start to act to the customer’s detriment? How do you measure that before the fact? Who is vulnerable now that the interest rate environment is so different?

When borrowers took a five-year fixed in 2019, they might have passed a lender’s affordability rules, borrowed over a million pounds without a blink, and been comfortably meeting their monthly outgoings. Just six months later, though, those same customers may have found themselves in an unenviable predicament. Yes, they could make changes, but do not underestimate desperation and the fact that it’s relative to lived experience.

Lenders have an enormous task on their hands – and it is one without regulatory edges they can plan for and within. As inflation bites, higher interest rates decimate disposable incomes, and lower business investment results in gradually rising unemployment, vulnerability has the potential to extend to almost anyone.

The onus is upon lenders to stitch together workable lending propositions that are sensitive to all the markets in which they operate and the borrowers they serve. Distribution and value chains will need to understand where their responsibilities lie, where their evolving handoff points begin (and perhaps do not end), and how the interplay between them has to evolve.

What does commercial and regulatory success look like now? It’s a big question. The answer will be different for each lender, but the common denominator is that partnership and planning will be key everywhere. M I

Tim Hague MD, Sagis

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BOTH SIDES NOW

Lorenzo Satchell has experienced the finance industry from both sides of the fence – early in his career as a broker, and now within lending as Hampshire Trust Bank’s sales director for bridging. It gives him an invaluable perspective, as Simon Meadows finds out

’ve had a lender background, a packager background, and a master broker’s background, and one of the things that I’ve learned over the years is that there is a human being at the end of every transaction,” says Lorenzo Satchell, head of sales for bridging at Hampshire Trust Bank (HTB), a specialist bank that supports businesses and individuals in realising their ambitions. “It comes with experience, really – just understanding and empathising.”

Satchell joined HTB in January to help build its bridging proposition. Sitting in his striking black-andwhite office, surrounded by classic monochrome images of Muhammad Ali (a hero of his), James Bond, and Frank Sinatra, with a bust of the Buddha close to his desk (“for karma”), the seasoned mortgage professional considers the role that advisers play.

“People underestimate that broker/packager role,” he points out. “To pick up a case and take it from inception to completion seems very easy, but it’s very hard indeed, particularly if you’ve got other parties involved within the transaction as well. There are people in this market who can only see it from a lending perspective. When you’ve been on the other side of that fence, you understand where the broker is coming from. So let’s not underestimate what the broker does. Brokers are the heartbeat of our business.

“If you speak to anyone in the market, that’s one of the things they will probably say about me – that I’m the broker’s friend. I’m always going to try to fight their corner. Obviously, my role is slightly changed now, but the principle remains the same.”

TRANSPARENT

What does Satchell think, then, makes a good broker?

“Someone who’s transparent – who understands that a partnership is a two-way street,” he replies. “I think those are probably the two fundamentals, and if they are easy to get on with and great to spend time with, that always helps as well.”

HTB provides savings accounts to individuals and businesses, and its dedicated asset finance, development finance, bridging finance, specialist mortgages, and

wholesale finance teams are tasked with ensuring that the SMEs to which it lends receive what it describes as “outstanding service, lasting relationships, integrity and expertise.” These are all vital, it believes, for its clients to prosper.

The bank’s dedicated bridging channel has been running for just over a year, and Satchell identifies real progress.

“HTB had done bridging in the past, but it was more of a by-product – it wasn’t something it focused on, and it was incorporated into other aspects of the business,” he explains. “In a year or so, there’s been a policy, lending criteria, and products, which have all been put together and delivered to market.

“We have set up an underwriting team and a processing team, a backend completions team and a

Lorenzo Satchell

“There are people in this market who can only see it from a lending perspective.... Brokers are the heartbeat of our business”

LORENZO SATCHELL, HAMPSHIRE TRUST BANK

sales team in a very difficult climate and in a saturated market for the short-term space. The outcome of that is a healthy pipeline, and a healthy completions book as well. So, looking at it as a whole, that’s quite an achievement.”

Satchell continues, “The key thing about bridging is being able to provide solutions in a very short period of time. No one gets up in the morning and says, ‘I want a bridging facility.’ There’s a reason – it’s a means to an end.

“Bridging should now be part of the brokers’ 360-degree toolkit. The mindset used to be that bridging was expensive. It’s evolved since the credit crunch, when there was a lack of liquidity. There are various types of bridging solutions now, packaged in different ways.”

OPTIMISTIC

Even after the turbulence of the past twelve months, Satchell remains optimistic about the UK economy and the implications for financial services.

“We’re starting to see some green shoots, with interest rates being reduced on the high street and with some of the specialist lenders now as well, which obviously is a positive thought because swaps are coming down,” he notes.

“There is a positivity around that; however, there’s a long way to go. There’s uncertainty out there, but with uncertainty come opportunities for portfolio investors, whether that’s a case of adding to their portfolios or enhancing their portfolios.”

Semi-commercial projects remain popular with many investors, Satchell observes.

“It’s more tax-efficient – but more importantly, it will cover off a lot of rental voids as well. It gives the best of both worlds, really, from that perspective,” he reasons.

Government changes in legislation will require that properties for all new tenancies have an energy performance certificate rating of band C or above starting from 2025. For existing tenancies, the new regulations won’t apply until 2028. Currently properties require an EPC rating of E or above.

Satchell believes this is focusing the minds of property investors.

“It’s coming closer and closer and closer,” he says. “Investors are looking at their assets and thinking about which properties fall within the EPC regulations, which ones need to be changed. Are they going to offload them or are they going to upgrade them?

“If they offload them, someone else is going to pick them up to use as an opportunity, or they’ll upgrade them accordingly to bring them up to standard and rent them out again. There’s still a lot of opportunities out there from that perspective.”

He continues, “We’re seeing more and more development exits as time goes on. Whether that’s for trying to release capital from one project, selling off the units there to start on a new project, or whether

there have been delays in materials and labour and they need more time to sell, we’re seeing a lot more of that.”

WISE

Satchell has come a long way from the young man of English and Spanish parentage who first ventured into the finance world.

“It’s interesting, because I was probably one of the most frivolous people there was as a teenager and in my mid-twenties,” he recalls. “But there was always an interest in numbers there. I was working in an insurance company in my mid-twenties. I didn’t really know what I wanted to do. Someone said to me, ‘There is a job at this company; would you like to go for it?’ I went for it, and the rest is history.”

It’s a career that’s brought Satchell to HTB, a business that has impressed him with its team ethos.

“We are in a saturated and challenging market,” he acknowledges, “there’s no question about it. But with the infrastructure we’ve got at HTB and the support, from board level down, which is second to none, everything’s going in the right direction, and we’ve got momentum.”

Although Satchell clearly has a demanding and involving role, he is in the gym every morning by six and is passionate about his long-term love of football and boxing. The tips he has picked up from the boxing ring over the years may arguably stand him in good stead for whatever economic battles lie ahead.

“We’re in this strange situation,” he says. “We have had a succession of rate rises, but on the flip side overall inflation has come down quite substantially, though not to where we want it to be. Who knows where we are going to go?

“Obviously that’s what an investor is going to be weighing up – should they or shouldn’t they look to purchase assets? It’s a very difficult one to call, but all the signs are there that things are starting to settle now, to become more stable.”

Satchell concludes, “I would say to brokers, understand the people you’re working with, understand how they function, and make sure that you are working with lenders accordingly.” M I

Sharing equity-release knowledge gives customers the power to decide

Geoff Charles CEO, Bower

No matter what stage you are at in your working life, thoughts of retirement have surely popped into your mind before. For me, thinking about life after work was one of the only ways I got through some of my earliest jobs. Now, some time later, I still think about what life will be like when I’m retired –but I’m not done yet.

For those who are diving into life after work, today’s retirement landscape can be a confusing and even intimidating place. The days when pensioners could rely on their pensions alone to fund their lives after work are well and truly gone. Plus, add to this the fact that retirement is, following years of life-expectancy growth, simply lasting far longer than it did, and retirement today is a far different animal from what current retirees’ parents and grandparents experienced.

Modern retirees are needing to find alternative funding routes and to look at saving money in as many ways as they can. One such alternative people have looked at over the years is interest-only mortgages. In fact, according to some lenders, interest-only products have become seriously alluring in recent times. Legal & General revealed that they saw a 53 per cent increase between May and June of searches by brokers for interest-only deals, surely proving that folks are looking to save where they can.

Paying off just the interest has

allowed thousands of mortgage holders to have more money in their pocket over the years – but, as we all know, rates are suddenly a lot higher than they were, and this is having a predictable impact. Horror stories in the press have circulated readily ever since interest rates started to climb back up, with one recent example I saw telling the story of a woman named Lynda who watched helplessly as her mortgage shot up from “£290 a month to £1,567 a month.”1 Of course, these examples will be the very worst the media can find, but they still tell an important story. And it’s one in which many people up and down the country find themselves in a bit of a financial dead end.

With rates so high and so many people having little pension wealth, savings, or any other backup to rely on, how will they afford a comfortable or even an average retirement? This is where products within the equityrelease stable can really come into their own.

Our unfortunate interest-only mortgage-holder from earlier represents an example of a person who could explore equity release. In the article, she says, “I’ve been trying to re-mortgage the house, but at my age, I can now see that I’m not going to get another mortgage. The only option would be to sell, but because I wouldn’t be able to buy another place, I’d be renting.”2

I do not know whether Lynda has looked into lifetime mortgages and, without understanding the entire picture, it is of course difficult to diagnose fully whether equity release will be the right fit for her. However, what I do think this speaks to is the road we have left to travel within our industry. Lynda, and many other

people up and down the country, are at a point where they assume the only alternative is either selling up or renting. But the availability of the lifetime mortgage means this may not be the case.

Education and spreading the truth about equity release will help people like Lynda, and the thousands of others like her who have seen their repayments skyrocket, understand all their options. I firmly believe that if everyone knew all the facts about lifetime mortgages and how they can work, our industry would naturally grow and grow, while also cementing its place as a mainstream retirement funding alternative. At present, however, I think that, although the general population understands our market far better than they did, say, a decade ago, there is still much room for improvement.

Ultimately, the rate spikes we have gone through over the last year or so are par for the course. Yes, we have had many years of smooth sailing with interest rates, but over the long term we all know this hasn’t been the case. For those people with mortgages like interest-only products, the sudden jump has been painful, but there are options out there that can reduce this sting. Ensuring that everyone across the land, including Lynda, knows every possible route they can explore will help everyone. After all, knowledge is power – and knowledge shared is power multiplied.

1 https://www.express.co.uk/finance/ personalfinance/1807077/interest-onlymortgage-repayment-cleaning-extraincome

Happy birthday, critical illness insurance

2023 represents the fortieth anniversary of critical illness insurance – a truly innovative insurance that has protected millions of UK consumers from the financial impact of serious illness. A trawl through history shows how these plans have metamorphosed over this period.

Logically, critical illness insurance is the only protection product that everybody needs and, subject to health, is able to take out. Not everybody needs life insurance, and not everybody is eligible for income protection.

The insurance was the brainchild of Dr Marius Barnard, who noted that, whilst he could restore his patients’ health, their financial positions were frequently ruined by the cost and duration of their illnesses.

Cannon Lincoln was the first insurer to offer critical illness in the UK –then termed “dread disease” – swiftly followed by Abbey Life, Allied Dunbar, and a host of other direct-sales insurers. A few years later the product underwent a sanitisation process when Standard Life and Norwich Union entered the market, enabling fiwnancial advisers to offer the plans to their clients.

In those early days the two insurers considered as offering the best definitions were Skandia Life and Scottish Mutual Pegasus. In February 1996 Scottish Provident introduced the first menu plan and combined this with an extended range of conditions and superior claims wordings.

Plans had moved on from the earlier days, with new conditions being

added, but with no standardisation of conditions, condition names, or claims wordings. Leading protection adviser John Joseph and the adviser body NFIFA combined to pressure the ABI into ending the Wild-West scenario and, in April 1999, issuing the first “Statement of Best Practice.” This aimed to impose minimum standards that ABI members were compelled to follow or exceed. Model wordings were provided for those conditions offered by 75 per cent of ABI members, and this constituted 20 conditions plus terminal illness and total permanent disability.

This provided a degree of harmonisation, although the better plans went beyond the model wordings. Over the next seven years a number of important changes occurred. Early-stage prostate cancer was removed from the cancer definition, and many insurers also removed coronary angioplasty, which had replaced coronary artery by-pass grafts as the operation of choice by cardiac surgeons.

The April 2006 ABI statement of best practice had a substantial impact by dumbing down the claims wordings, making the plans far less effective than previously. With hindsight we can see 2007 as the nadir of CIC plans, and from this point on they steadily improved, with the addition of more conditions and the contrivance of superior claims wordings.

Not all additional conditions had validity, as many were added for the sake of being able to point to a high number of conditions, suggestive as offering some form of pre-eminence. This so-called condition race has, thankfully, now ended.

Another piece of marketing nonsense was the ABI+ sobriquet whereby insurers attempted to outdo the opposition by claiming to offer 18 or 19 ABI+ conditions. This was where a

tweak, however modest, enabled them to claim superiority. The trouble here was that some insurers offered markedly better claims wordings than their competitors.

The next move forward was the introduction of additional payment conditions. Initially this was just for early-stage breast and prostate cancer, but has since extended to numerous other conditions, the majority of which serve to extend the breadth of coverage.

Two other areas have turned into secondary battlefields – children’s critical illness and added benefits. The 1999 ABI model wording for children’s CIC had a commencement date of three years. Today’s better plans cover children from birth, with many also including stillbirth from week 24. Added benefits proved its value during the 2020–21 COVID horrors, and two insurers now offer free annual MOTs.

The message is that these plans have improved substantially over the last 40 years, and all advisers need to be aware of the changes so that they can regularly review their clients’ situations. After all, it is a consumer duty requirement. M I

Alan Lakey director, CI Expert

Claims history should form a core part of assessing true value of insurance and advice

If all life questions were answered correctly by all consumers all of the time, I can guarantee claims payments would rise by even greater percentages than at present, given that a significant proportion of the gap exists due to non-disclosure.

Isaw some recent output from a client survey asking participants to assess the most important aspects to them when choosing a protection product.

Topping the list were: price (chosen by 50 per cent), breadth of cover (just below 40 per cent), brand reputation (30 per cent), and recommendations from the adviser (20 per cent).

While these top four are both common and commendable, one area that is missing for me is that of claims.

We have all been busy going through the Fair Value Assessments (FVAs) of all providers under the new consumer duty requirements, and, of course, constructing our own Fair Value Charters for use with our own clients.

In making decisions on which insurers you choose to operate with –the first principle in reviewing FVAs, it could be said – I would suggest claims history should play at least a part in your thinking.

The life assurance industry has been doing much to highlight its positive record in respect of claims paid, and I know from my own work on various groups that this is carrying on at some pace.

There are those who would like to go farther when assessing payouts, with the view of many being that statistics should be made available on “non-payouts.” I would also strongly encourage, at the client engagement stage, the principle of getting underwriting correct at the outset.

In some instances, this is innocent, and I know of many insurers who have paid out in these circumstances; while at times they are reluctant to shout about it, they should nonetheless be applauded for doing so. I also am well aware that, in many organisations, all rejected claims have to be agreed at Board Level.

The simple fact is that if it is made absolutely clear at engagement that getting the answers right to all questions will probably increase the percentage chance of a claim being paid out (should it be covered under the claim conditions) to 100%, then the client can feel extremely comfortable having accepted your recommendation.

There will always be those who try to cheat the system, of course – indeed, the Association of British Insurers (ABI) has revealed that despite a 19 per cent decline in the volume of fraudulent insurance claims detected in 2022, the value of the average scam increased 20 per cent year-on-year to £15,000, compared to £12,283 in 2021.

The total number of fraudulent claims detected last year dropped to 72,600 cases compared to 89,000 in 2021, but the value of the average scam fell at a lower rate following higher inflation and a £134 million rise in the value of property frauds.

Thankfully, the majority of these fall in the motor and household categories, but make no mistake – many sit in our field (personal injury, income protection, and healthcare), as well as in life and CI.

Returning to definitions, many claims do not get paid, as they simply do not meet the definitions set out in the policy. It is important not only for your client but also for every adviser to understand when policies will and won’t pay. This clearly should form part of your own assessments of which firms to use as part of your own client recommendations across not only life but general insurance, too.

Insurers have done much to develop systems that dig deeper when clients admit to having certain conditions to draw out as accurate a picture as possible, and some providers also allow the client to answer the questions directly online, which, it is hoped, will also offer a clearer picture.

Simply looking at claims statistics for the products you distribute is at least a starting point, however, and when assessing Price and Value – which form one of the four pillars of consumer duty, as Products and Services form another – then claims’ records as well as definitions should also form a major part aside from price. That is part of what advisers can add in terms of their value in the advice chain.

One final point on definitions. You may have seen recently that Guardian have made a claim payout on a policy that didn’t reach the initial definition of the policy taken out – but, as they had changed the definitions and applied them retrospectively to all policyholders, the claim was paid.

The principles that insurers take on existing versus new customers cannot be ignored, and such an action from Guardian can only be applauded with, hopefully, other insurers following suit in helping to make the non-payout of claims a thing of the past – other than for fraudsters, of course. M I

Mike Allison head of protection, Paradigm Mortgage Services

Has ESG gone off the rails?

Sharon Bentley-

As an investment firm that has taken into consideration environmental, social, and governance factors for over a decade, with close attention being paid since our founding in 2006 to corporate social responsibility – good governance, anti-corruption and bribery, and “putting something back” into communities – I am becoming increasingly queasy about the direction of travel of so-called ESG.

In an article back in March on the parlous state of ESG, I lamented that what might have been a framework to encourage more ethical investing had become a bureaucratic nightmare of box-ticking, supported by a ratings industry that has helped large investment management companies greenwash their funds.

It looks now as if ESG is becoming something much worse, because it appears to have been hijacked by social and environmental “activists,” in addition to the bureaucracy.

Are there any other ESG investors out there feeling similarly disconcerted by this turn of events?

By way of example, our firm strongly supports getting more women and girls to consider investment management as a career, and we have a good gender balance in our company. But there are several well-run businesses in our investment universe that are downgraded in the sustainability ratings because women do not yet comprise one-third of their boards.

In principle it would be great to have this level of female participation, assuming women can be found who are qualified and competent for board roles. But in our experience of speaking with

senior management in a wide range of industries, this is not so easy to achieve. There simply are not enough qualified women coming forward for such roles, or indeed entering certain industries and progressing to this level. Should we desist from investing in such companies, which are otherwise providing a useful economic and social function? The same comment might apply to any other underrepresented minority.

While encouragement is fine, when regulation starts to become coercive, there is a problem. Investors withdraw or vote against management in AGMs because companies are not fulfilling certain social criteria. Corporations start to espouse political ideologies and use their capital to force social outcomes.

You get into situations, as in the UK, where basic services, like banking, can be denied to individuals, small businesses, and organisations whose views may not concur with a company’s political or sociological stance. Companies themselves feel pressured to fulfil certain criteria, even if it is not in their or their shareholders’ economic interest to do so.

The same goes for climate-related targets. While most people would be completely on side with treating our planet with more care, this needs to be

balanced with treating individuals with the same respect. Targets for net zero may appear laudable, but what will be the repercussions for individuals and businesses?

I am not sure anyone has come up with an accurate assessment, but one suspects the effects will not all be good. Having access to affordable energy is crucial to individual as well as corporate and national wellbeing. It is about achieving the right balance, and when we start getting diktats regarding where we can travel, what mode of transport we can use, etc, we can be pretty sure we will not achieve the balance most of us seek.

As it happens, since 2014, in our European Strategy, we have chosen only to invest in renewable energy, and then only in certain types, as some can be environmentally damaging. We concede that our societies cannot currently function without conventional energy, but we believe that the decision of where to invest should be left to individual investors, and not dictated by bureaucrats and pressure groups.

The passage of time and the logic of the market will eventually dictate which types of energy we should be using, and in a far more balanced way than governments, bureaucracy, or indeed ESG ever could. M I

Hamlyn director, Aubrey Capital Management

‘I’VE STILL GOT THINGS I WANT TO ACHIEVE’

“This is a time of opportunity,” declares Peter Brodnicki with admirable enthusiasm. “I enjoy the challenge these extreme market conditions bring because if you’re in good shape, you’ll be in better shape at the end of it.”

Not for Brodnicki, it seems, is any navel-gazing despondency. As the CEO of Mortgage Advice Bureau (MAB), he offers the benefit of his considerable expertise, honed over more than thirty years in the business.

“It’s just a timing issue,” he says, with understated simplicity. “If your business was in a good shape before this financial crisis hit, then you’ll get through this and you’ll make up those transactions. It’s just that you will have to be even more brutally efficient in this environment than you’ve ever been before.

“If your business is in tough financial shape, then this will be a very difficult for you. We need to build a structure in which our partner firms are less affected when the going gets tough and we have got those efficiencies.”

MAB has grown to over two thousand regional advisers, offering appointments to customers throughout the UK. Much of this growth is down to Brodnicki’s business acumen, clearly – but also, perhaps, his positivity in the face of economic adversity, and the team he has around him, which he rates incredibly highly.

“I don’t really worry about what’s happening in our market,” he confides. “Sadly, there’s nothing I can do about it, as much as I’d love to. But what I can do about it is control the things that are in my gift.

“I get that it’s tougher and I get the housing market’s not where it needs to be yet, but it will be. There are always two ways to react to any crisis and that’s either feel sorry for yourself and put your head in the sand, or you can do something about it. Whenever the going gets tough, the best firms put themselves in a really good position for when the market picks

up. They just get on with it.

“It’s not like there aren’t mortgages being done and there aren’t people buying houses. There are people refinancing. Every single person I know, including me, is sitting on opportunities we could be doing more with. If we’re short of clients, let’s go and find some more – there are plenty out there.”

He says, “As soon as your leads fall off, start focusing on some of those things you don’t do when you’re busy – selling protection and going back to your clients more. Just pick up the phone and talk to them and business opportunities will come; that activity will pay off in the short, medium, or long term. It’s not rocket science.”

FASCINATION

Born in Fulham, West London, to Polish parents, Brodnicki’s fascination with business quite likely came from observing his father.

“My dad had his own business,” he recalls, “a very specialist business, a pharmaceutical translations business. He did a lot of things right, got a lot of things wrong, and I learned from both. He nearly lost his business a few times when markets turned against him; we all supported him in any way we could in those tough times. He was always a bit of a gambler in business, in a positive way.

“I was interested in the stock market at a very early age as well. When I was probably in my early teens, my dad bought me a small number of shares on my birthdays which I could follow to understand how different firms operated and performed. I always dreamt of having a company listed on the stock market.”

Brodnicki had always wanted to go into finance, and he started in second-charge lending in the late 1980s. Keen to earn more money, he trained as an adviser, and then took on a role managing brokers.

“I loved advising,” he reflects. “It was one of those things that gave you an immediate buzz because you

Peter Brodnicki is undoubtedly an industry icon, having built Mortgage Advice Bureau into one of the UK’s highest-profile, most respected networks and broker brands. And he’s not planning to stop there, he tells Simon Meadows

Peter Brodnicki

had an end result. When you’re running a business or managing it, you don’t get that reward straight away. I’m always going be very empathetic to brokers and the role they play.”

He continues, “I guess my first strategic move was when I joined Legal & General in the mid 1990s as its recruitment director and head of estate agency network. There was a small business in Derby called Mortgage Advice Bureau that I was advising on its strategy. It owned an estate agency, a mortgage shop, a surveying business and lettings, so it had all the disciplines there, but it wasn’t a network.

“I ended up investing in that business and joined it to set up a new company which I majority-owned. I ended up merging the two businesses, brought my own team in, those key people took shareholdings, and I grew it from there, with a completely different business model.”

Brodnicki has headed up MAB since 2000.

“I live in Surrey, and every Monday for the last 23 years, unless it’s a bank holiday, I drive up at about half four in the morning to Derby, get there about six thirty, spend three days there, and then I’m in London the other two days,” he says.

Sadly, Brodnicki’s father did not live to see young Peter’s success – he died in his 60s– but one can’t help but imagine that he would have been proud that in 2014 MAB was listed on the London Stock Exchange plc’s Alternative Investment Market (AIM).

“We had quite a few offers on the business, in the run-up to the global banking crisis, then we used that banking crisis as a stepping stone to really fast-track and grow, rather than batten down the hatches,” he remembers. “Then we had some more interest and it got us thinking whether we should go down that route.

“We wanted to have autonomy, we wanted to keep control, and the nice thing about being a listed business is it gives you that control but it puts you on another level, another platform, in terms of transparency, openness, and scale, and people having trust in you as you get into the market in a different way. So that was a fascinating time, being listed, and it’s been fascinating ever since.”

STRENGTH

Brodnicki makes no secret of the fact that he loves people – he considers them the biggest strength of MAB, and its top team ensures that it engages with its firms (“We don’t want to be sitting in an ivory tower”). That enjoyment of a human connection evidently underpins his approach to business.

“Eighty to ninety per cent of every industry is the same,” he explains. “If it’s to do with people and to do with customers, it’s about understanding your customers and the way they behave and where you find them, how you capture them, how you nurture

them, how you do business with them, how you get recommendations from them, how you retain them and how you earn the right to generate repeat business from them.

“I love learning and anticipating where the intermediary sector is heading. I love speaking to loads of people, seeing what they do. To me, that’s exciting as we find new ways every day of doing something differently.”

He reasons, “Even if I want to be the best at dealing with the issues that are here today, I want to make sure that we’re also considering what’s around the corner. Are we heading in the right direction, are we spending enough time investing in where things are going to be? If I can be ahead of the game in terms of where our industry’s heading, then that allows me to really have a very successful business, rather than be reactive.

“Our industry’s moved behind lots of others be-

cause it’s deemed to be more complex, but it will catch up.”

So having a vision and anticipating – or at least keenly observing – the direction of travel is part of Brodnicki’s skill set. But it’s also about being decisive.

“I’m quite happy to make decisions, and if I get them wrong, I’m very happy to U-turn those decisions – and I think in life, that’s the most important thing,” he emphasises. “I’ve got a million ideas, and if those don’t work, I’ll go off and do something else, so there’s plenty of things to go for out there.

“I see a lot of very intelligent people, ‘way more intelligent than me, who know what to do but they just don’t do it, and either it’s just because they are lacking in confidence, or they don’t want to fail.”

He continues, “To progress in life, you have got to make decisions. You have got be assertive with that decision-making, and the minute you determine a decision was the wrong one, don’t try to spend the rest of the year or your life proving it wasn’t wrong. U-turn and try something else. And that’s probably the best bit of advice I could give to anybody.”

Brodnicki describes a culture at MAB of constant evolution and says he admires impatience, while noting that it wouldn’t be the most common word amongst the values highlighted in those often-seen workplace posters aimed at shaping a productive

“To progress in life, you have got to make decisions. You have got be assertive with that decisionmaking”

PETER BRODNICKI, MORTGAGE ADVICE BUREAU

environment.

“We’re always wanting to evolve, always wanting to do better, always wanting to learn, always wanting to listen, and we get frustrated if we can’t do it quickly enough,” he admits. “I am an impatient person, but impatient because I know there’s so many more things we could be doing better or differently and there’s only so much you can do at any one time.”

One area that Brodnicki identifies as ripe for change is the mortgage industry’s technology.

“There’s been a lot of talk in the last five or six years about technology, but we haven’t necessarily seen any major positive impact of it yet,” he considers. “It’s taking time, but it will happen, and it will escalate. It’s exciting, and I don’t want to miss out on that and the opportunity it will bring to run an even better business and deliver optimal customer outcomes. In the 23 years I have been running MAB not a lot has changed in our industry, really, other than reacting to boom/bust economies and changes in regulation, which intermediaries have done exceptionally well.

“It can only be good for the customer, good for the broker, good for the firms – and we have got to look at how we embrace technology. We’ve always built it ourselves – that has always been my belief, from day one. That’s been a pain in the arse sometimes because when it goes wrong, it’s your fault – but when it goes right, you can deliver exactly what you want to deliver, rather than being reliant on someone else’s technology, and then it’s fantastically rewarding.

“Everything’s about lead flow – leads are our biggest focus and AI [artificial intelligence] will help us understand more about our clients and how we convert them. That’s the bit to which that I am trying to extend our model.”

ACHIEVEMENT

Brodnicki is 61 now (though he looks younger – “You need to put that in the article!” he laughs, when I tell him), yet he is non-committal about retirement.

“I’ve still got things I want to achieve,” he says simply. “The most important thing to me isn’t the money, it’s being happy, it’s enjoying what you do, and money can’t buy you that. So, I’m really very, very lucky to be in a position I am, running MAB. This is something that’s been in my DNA for a long time.”

He says, “I still get involved in recruitment and really enjoy it. When I meet successful business leaders and advisers, and entrepreneurs of the future in their 20s or 30s, and they’ve got all this ambition, that inspires me.

“As long as I’m adding value to my team and to our partner firms, to our advisers, to our customers and to our investors, then I’ll continue working.”

He does have passions outside of work, which one would imagine could pave the way for a happy (albeit reluctant) retirement. One he pursues at home, watching his beloved Fulham Football Club regularly. The other, he pursues away from home.

“I’ve got a place in Ibiza I bought last year which I absolutely love, and I have been doing work to it,” he explains. “I love going out there – it’s just so chilled and relaxed. The young and the old and the rich and the poor all mix together. It’s far less judgmental than the UK.”

But, for now, at least, Brodnicki’s mind is focused on work.

“It has its challenges, and part of enjoying work is having challenges and overcoming them, isn’t it? Because that gives you success,” he enthuses.

“I’m not the perfect CEO by any stretch of the imagination, but I love it and I’ve got a great, loyal team around me, too. Ninety-nine per cent of the hard work in this business isn’t done by me, it’s done by my team. They work bloody hard, and it’s fantastic working with them. They inspire me every day to come and do more.”

Brodnicki concludes, “I guess I’m looking at the future and where we’re moving to, and are we prepared for that? We’ve got to plan the next five, ten, twenty years, and that’s what I do, very much thinking ahead. It’s all good – this business is in great hands.” M I

“The most important thing to me isn’t the money, it’s being happy, it’s enjoying what you do, and money can’t buy you that”

PETER BRODNICKI, MORTGAGE ADVICE BUREAU

“Data is the new oil” … so to speak

In 2006, British mathematician Clive Humby is said to have coined the phrase “data is the new oil” – but over the intervening 17 years, what he actually meant by that has got rather lost. “Like oil, data is valuable,” he said. “But if unrefined, it cannot really be used. It has to be changed into gas, plastic, chemicals, etc. to create a valuable entity that drives profitable activity. So data has to be broken down and analysed for it to have value.”

Anyone who’s had a conversation about “big data” or “analytics” or “machine learning” over the past decade will know that the majority of those outside the data functions in businesses are still a bit vague about how it all works. Companies have long accepted that collecting data is important, protecting it is now a highly regulated activity, and preserving the privacy of the owners of that data is paramount.

But many have fallen into the trap of thinking data itself is valuable. We know from our own experience and that of our clients that an awful lot of that data has immense value, but it’s all muddled up with yesterday’s leftovers, a healthy dose of imagination, erroneous tests, and worst-case wishful thinking.

Fact and fiction are indeterminate

until data is refined, sorted, and evaluated. We’re at an interesting touch point at the moment when it comes to this. How do we determine which data is true? Which data is of value when it comes to translating trends into business strategy? This has been a very real challenge for businesses over the past decade – even for those that excel at harvesting and using data meaningfully.

The advent of artificial intelligence and its quite sudden accessibility to every person has spun the data equation on its head. ChatGPT – the natural-language processing tool that can talk to you like a friend, that will admit when it’s wrong, write university papers, and answer your emails for you – is the start of a new era when it comes to data. It has companies thinking hard about the opportunities and risks that come with AI. But common themes are emerging about security and property rights, as well as the reliability and timeliness of the core material: data.

Some sectors have pioneered the way they use data very effectively; others have found the going tougher –especially in highly regulated sectors. Writing for Forbes magazine recently, Nisha Talagala, an entrepreneur and technologist in AI and AI literacy, articulated the conundrum very succinctly.

“Data abounds,” she said. “But it is not all the same quality. Some data is dirty – filled with mistakes and omissions. Some data is flat out wrong and yet others are fictional. This is particularly true if you rely on public domain data. Some datasets contain bias – which can create major risks

for businesses if used in an AI. Some simply contain mistakes.”

Her conclusion was, “A solid understanding of where the data comes from is essential to knowing whether the insights the data generates are valuable or even safe.”

This is a perfect example of why data provenance is so fundamental. AI – or, if you prefer, machine learning –however brilliant, is self-taught through exposure to data – unfathomable amounts of it. But when there is a gap in the data available to it, we all need to be aware of how AI fills in the blanks. When you are in charge of a business conducting regulated activities, accuracy is a necessity. Data has ingrained bias, as well as the opportunity to illustrate new areas of opportunity.

Writing for B2B publication The Drum, Jon Suarez-Davis, strategic advisor to programmatic privacy, governance, and security platform Ketch, said, “As we look to the new data economy, we need a new guiding metaphor. A way of thinking about data that focuses less on simply exploiting a resource, and more on building equitable and sustainable relationships with consumers.” He concludes, “The reality is that data isn’t a resource to be passively extracted from consumers – it’s more like a currency that consumers actively invest in in order to unlock specific benefits.”

Winning in this newly evolving landscape is achievable. Doing it alone is not. Having a partner whose expertise, experience, and knowledge complement and add to your own is the way to start. M I

Mark Blackwell COO, CoreLogic UK

We should not forget first-time buyers

in England. In both Wales and Northern Ireland, the ratio was 23 per cent.

Top of this summer’s mortgage market agenda has been the consumer duty rules coming into force and the signifi cant challenge of managing millions of mortgage borrowers heading into diffi cult fi nancial adjustments. The remortgage part of this has been most widely focused on by media – it is where the most immediate pain points will be felt as over two million households come to the end of their fi xed-rate deals. There is, however, another part of the market that is also suffering.

Those wishing to escape the increasingly overwhelming burden of ever-rising rents are desperate to get onto the property ladder. Even as house prices start to come down from their peaks, let’s not forget that realising the ambition of becoming a homeowner is harder than it’s ever been.

Rightmove’s rental index showed that in the fi rst quarter, national average asking rents outside London reached a new record of £1,190 per calendar month – the thirteenth consecutive quarterly rise. Average asking rents in London surpassed £2,500 for the fi rst time to reach a new record.

Back in December last year, the Offi ce for National Statistics published data recording rental and income statistics for 2021. It showed private renters on a median household income could expect to spend 26 per cent of their income on a median-priced rented home

The challenge for would-be fi rst-time buyers at that time was fi nding enough money each month to save toward a deposit – made all the harder as house prices rocketed over 10 per cent every 12 months. In 2021, the base rate was below one per cent. Mortgage rates could be secured for less than one per cent, and, while the deposit was a hurdle too high for many – surmountable largely by those with an inheritance or generous parents – mortgage fi nancing was, at least, affordable.

Now the average two-year and five-year fixed rate is over six per cent, and for many first-time buyers it will seem a catastrophic cocktail. It also comes just as the Help to Buy scheme, which helped more than 375,000 buyers into homes of their own, drew to a close in March this year.

The scheme’s closure is not the end of government and industry support for hopeful fi rst-time buyers – there are still plenty of programmes on offer to support would-be homeowners in the purchase of their fi rst home; they are just less wellknown at the moment. They are also less widely available than Help to Buy became over the decade it remained in place.

This brings me back to the consumer duty rules. Lenders are acutely aware of how important it is that they take due care with customers facing fi nancial diffi culties at the point of remortgage. Even before deals expire, there will be borrowers under such pressure from rising costs elsewhere that keeping up with mortgage repayments will already be a challenge. But there are also fi rst-time buyers to consider.

Although the consumer duty cannot reasonably be expected to be applied to customer contracts that do not yet exist, there is an argument for lenders considering their fi rst-time buyer propositions. Are terms, pricing, and product range delivering good outcomes for those who are desperate to become customers?

It is an extension of the spirit of the consumer duty not to put barriers inadvertently in the way of prospective buyers. It’s why lenders are increasingly waking up to the importance of supporting those affordable housing schemes that are now available to fi rst-time buyers.

Of course, embracing the theory and desire to support the next generation of homeowners is one thing; having the systems in place to deliver and make that desire a reality is another.

Though committing to the cause is in the lender’s gift , at Iress we’re doing our bit to make the goal achievable on a practical basis. We recently developed our MSO soft ware to be fully enabled to support the latest affordable homeownership schemes. Now, both fi rst-time buyers and those who are already on the property ladder, who need to upsize to accommodate growing families or to relocate for work or family, have a broader range of lenders able to help them. Three new schemes are now supported in MSO – the government-backed First Homes schemes and industry schemes Deposit Unlock and Own New.

It’s a small step, one largely invisible to those borrowers who will benefi t. But it’s a step in the right direction, and we’re looking forward to the journey with everyone who wants to take it with us. M I

Steve Carruthers business development director, Iress

Capitalise on consumer duty

speculation on price and wage inflation, and thus the path of the base rate over the next two years. Pricing is a game – a mix of musical chairs and dominoes.

The principle applies just as readily to getting a firmer grip on balance-sheet risk in relation to issuance.

Those of us operating in the mortgage market are only too aware that mortgage rates have risen significantly this year. The average quoted rate on a two-year fixed-rate 75 per cent loan-to-value (LTV) mortgage rose by around 75 basis points to 5.5 per cent in June, and by a further 75 basis points in July, according to the Bank of England’s data. The report suggested that the rise reflects the pass-through of higher risk-free interest rates – that is, the two-year overnight index swap rate, which has risen by around 150 basis points since May.

“Mortgage rates appear to have repriced more rapidly than in the past,” the report noted, “perhaps reflecting the scale and speed of the increase in reference rates.” I would posit another, complementary explanation for this acceleration: June’s analysis from Moneyfacts revealed that alongside repricing rates higher, the volume of deals, and lenders repricing, have ballooned.

In three days, Moneyfacts recorded fixed-rate deals being pulled by 13 lenders, with three more lenders pulling their entire fixed-rate ranges. In under a week, the number of mortgages fell from 5,385 deals to 5,012. The speed of pass-through on mortgage pricing has as much (if not more) to do with competitive pressures forcing lenders to pull and reintroduce rates at a sometimes-alarming pace. So acute is the pressure on a significant number of borrowers’ affordability that incremental shifts in product availability have a near-instant knock-on effect on demand currents. Pricing is not simply a matter of profit margin protection amid constantly fluctuating market

Lenders must fall over themselves to react to competitive pricing in order to avoid being utterly overwhelmed by applications. For lenders, it matters less whether rates go up or down –the change is the challenge. Added to this complex riptide of market rates, expectation, monetary policy, and service level agreements is the quarterly flux to achieve lending targets. Managing volumes is extremely challenging at the best of times, but factor in the speed of product design adjustments and it’s a nightmare to navigate. As more and more lenders are discovering to their cost, agility is no longer a nice-to-have – it’s an imperative for providers trading at volume.

Switching to flexible, fast, and easily upgraded software as a service to support lending is not just a commercial no-brainer. It also ticks compliance and competitiveness boxes.

A recent report from professional services firm Deloitte highlighted how banks and building societies could capitalise on July’s consumer duty rules through retail deposit provision – something very high on the agenda following government intervention to ensure savers benefitted from higher rates as quickly as mortgage pricing rose.

Analysts noted the opportunity for lenders to “dial up personalisation strategy” through “deeper understanding of customer behaviour.” Far from being superficial consultancy speak, this report offered real insight.

“Comprehensive analytics platforms, which enable detailed tracking of customer deposit migrations and analysis augmented by intelligence on changes in market rates can identify emerging trends in deposit migrations,” the report states, thus “enabling banks to offer tailored, fee-generating savings products that proactively address customers’ evolving financial needs.”

Deloitte’s report noted, “The Consumer Duty Act spurs regulatory scrutiny, mandating fair and transparent loan pricing strategies and product design adjustments.” This is the next key evolution in mortgage provision, especially in a market where borrowers are under increasing financial pressure.

The Bank of England said in its Monetary Policy Report, “There may be the potential for remortgaging behaviour to slow or weaken the transmission of higher interest rates to the economy, including if more households than usual choose to extend the terms of their mortgage than choose to shorten their terms.”

This adds yet another dimension to the pricing and provision of mortgages. Documenting evidence that every step to ensure the best outcome for a customer has been taken is not just an advice responsibility. Lenders must show they are willing to flex appropriately – and they must also show they actually can.

A brief bit of news from Ohpen HQ. We are very pleased to have been selected by specialist lender Foundation Home Loans to provide our softwareas-a-service mortgage technology. The partnership will transform Foundation’s underwriting platform and mortgageorigination proposition, automating key parts of the journey and using real-time data to improve the broker experience.

Chris Lomas, director of IT at Foundation Home Loans, said, “We selected Ohpen to deliver a best-in-class platform that will give our business the capability to meet our future strategy. The flexible and highly configurable range of core modules allows us to offer a state-of-the art broker experience.

“We were convinced by the quality of Ohpen’s team and their commitment to deliver the highest level of systems performance required to support our broker partners and our business.” M I

Jerry Mulle UK managing director, Ohpen

RECRUITMENT

The perceived threat of DEI initiatives

status quo by seeking to legitimize it. Defending the status quo can prevent changes that might be perceived as harmful to their group.

ensure that they are not automatically associated with discrimination and privilege.

In recent years, we’ve seen tremendous growth in diversity, equity, and inclusion (DEI) initiatives. Yet there remains internal resistance to these initiatives, often inflamed by the psychological threats perceived by the majority groups.

Researchers have termed this “status threat,” and the people who experience it often perceive diversity initiatives in a very binary way. They assume that if members of minority groups make any gains – in opportunities, hires, the potential for promotion – members of the majority group will necessarily incur losses.

Some group members may also fear that DEI initiatives imply that their own achievements are not the result of their skills and qualities but simply a result of, amongst other things, whom they know from the same background, and of the advantage that has gained them in their careers. Advantaged-group members feel that recognising the existence of bias, discrimination, and inequality undermines their own successes.

Additionally, research has revealed that because many people are fundamentally motivated to see themselves as good and moral and are committed to the ideal of equality, they may be very uncomfortable with the fact that DEI initiatives highlight how, predominantly, white males have benefitted from traditional hiring practices and other structures.

When majority group members experience one or more of such threats, they may try to justify the

Some people resist DEI initiatives by downplaying inequality or bias, or even denying that they exist at all. And in some cases, people might be willing to acknowledge that there is discrimination and inequality while maintaining that they themselves are unbiased and have never benefited from discrimination.

Overcoming these different kinds of resistance is essential to advancing DEI efforts in your organisation.

There is lots of evidence of the “win-win” aspects of DEI initiatives, particularly of how increased diversity can drive long-term growth in business and increase opportunities for everyone (often referred to as the “business case” for diversity).

Leadership should reflect on how they express the need for diversity training. Repeatedly using statistics to highlight underrepresentation can create a sense of “Are we no longer good enough?” Focussing on general ideals of fairness and equality rather than on DEI as an obligation that majority-group members must live up to will increase support for DEI programs. So, consider highlighting how DEI efforts present an opportunity for majority-group members to demonstrate their commitment to moral principles with which they probably already identify, and in doing so

It is long past time that we insist on requiring only necessary qualifications for a role (for instance, CeMAP for Advisers) and stop creating barriers by demanding further educational requirements; we need to allow lived experience and unconventional career paths to be considered, and I have heard of no resistance to this. I’m sure this is because such an approach is intersectional.

Similarly, mental health is rightly getting much attention, and, again, there is no obvious resistance to this –because, again, it is not specific to race and gender.

Employers who truly put the value of inclusivity and diversity at the forefront of their corporate values are already showing they are not perpetuating the same behaviours, the same idea creation, and the same approaches. But, just to illustrate a point, for all the progress we’ve made, I still know plenty of men who had already dismissed any women’s football team victory in the recent World Cup final as less than what the British men’s team achieved in 1966. To help any readers this has triggered, let me point out that there were 16 teams in 1966 while there were 32 in 2023, and that 1966 gave England home advantage and a very generous linesman! M I

Pete Gwilliam owner, Virtus Search

The UK’s best mortgage companies to work for are prioritising their employees by ensuring they are rewarded, equipped, and part of a supportive culture

EXCELLENCE FOR EMPLOYEES

MORTGAGE INTRODUCER recognises the Top Mortgage Employers of 2023, organisations that stand out for their exceptional commitment to their employees’ experiences.

Highlighting how complex it is to excel, Liz Syms, vice chair of the Society of Mortgage Professionals and CEO and founder of Connect Mortgages, says, “There is no one thing that makes a top employer. It is a combination of factors that come together that make a company a great place to be.

“Top companies take into account the varied needs of all of their employees and create a diverse and inclusive place to work.

Every employee is di erent, and all have their own unique abilities that they are able to bring to any company. It is the job of the leaders of the business to recognise those abilities and cultivate them.”

This year’s Top Mortgage Employers achieved this and were judged by their sta ’s assessment of their culture, compensation and benefits, reputation, diversity, equity and inclusion (DE&I) e orts, and more.

Specialist lender with a commonsense approach

From its launch in 2022, Quantum Mortgages

prioritised its employees’ wellbeing by creating an inclusive and positive workplace at the leading edge of work-life balance.

The specialist lender was awarded the prestigious gold medal overall in the lenders’ category due to an employee satisfaction rating of 90 per cent.

“This recognition means more to us than anything because it’s a result of surveys from our people rather than the opinion of a judging panel,” says co-founder and managing director Jason Neale.

“We hire smart people, they tell us what to do, and everybody takes ownership; there’s no micromanagement, and I think that delivers the right type of culture”

Jason Neale, Quantum Mortgages

Across eight di erent metrics in MI’s survey, employees returned high marks for:

• reputation: 9.8

• DE&I: 9.6

• innovation: 9.5

• culture: 9.4

• compensation: 8.4

Having worked in large financial businesses, the company’s leaders eschewed a corporate approach.

“We’re more entrepreneurial, and we believe in common sense, not just in our lending decisions but in recognising we’re a group of decent, hardworking people who are all trying our best to help others,” Neale says. “One of the first things we did when we started this business was to ask ourselves what we could do to look after our people, because if you look after them, they will look after your customers.”

This is echoed by the Society of Mortgage Professionals’ Syms, who says, “Top companies that show the importance of sta to the business usually have sta who replicate the behaviour with customers.”

Quantum Mortgages distinguishes itself as one of the best mortgage companies to work for by:

• selecting a convenient o ce location with free parking and within walking distance of a train station, reducing employees’ commuting time and costs

• setting work hours at 9 a.m. to 5 p.m., when many specialist lenders are 8:30 a.m. to 5:30 p.m.

• o ering a hybrid work model with three days in-o ce and two days remote

“These may sound like small things, but employees tell us they make a huge di erence in their work-life balance,” says Neale.

The company emphasises an equitable approach to benefits, o ering all employees a comprehensive package that includes elements often reserved for senior management and extended days o during secular holidays.

“We made sure the package was right for everybody, and we gave them a mission:

METHODOLOGY

To help recognise and narrow down the nominations for the Top Mortgage Employers 2023 in the UK, MortgageIntroducer invited organisations to fill out an employer form highlighting their various o erings and practices. Employees of the nominated companies were then asked to take an anonymous survey evaluating their workplace based on eight key factors: advancement, benefits, compensation, culture, diversity, equity and inclusion, innovation, reputation and sustainable programs.

To qualify, each nominee had to meet a minimum number of employee responses based on the overall size of the organisation: employers with 10–100 employees needed a minimum of 10 responses; employers with 101–500 employees needed a minimum of 20 responses; and employers with more than 500 employees needed a minimum of 50 responses.

Gold, silver, and bronze medals are awarded to the top three companies in each category, based on overall employee satisfaction.

INSIGHTS

together, we will build a specialist lender that will take on big corporate business, and we’ll succeed,” says Neale. “We empower everyone to do their job to the best of their ability, and we have a bit of fun along the way.”

In a relatively short timeframe, Quantum Mortgages has created a thriving culture that promotes staff development and training with financial support and prides

itself on promoting from within.

A testament to its outstanding environment is the composition of its workforce:

• 60 per cent of the team is female

• 30 per cent identify as ethnically diverse

“When we set up this business, we believed that if you have to come to work, it might as

“The courage part of one of our pillars is that if it’s not good enough or working, we’ll do something about it. Don’t be afraid to tell me it’s not good enough; we’ll change it” Gavin Richardson, Mortgages for Business

As part of our editorial process, Key Media’s researchers interviewed the subject-matter experts below for their independent analysis of this report and its findings.

Liz

Syms vice chair, Society of Mortgage Professionals chief executive o cer and founder Connect Mortgages

Ryan

Venner managing director Premier Jobs UK

well be a decent place people want to come to,” Neale says. “Our success is all about our o ce culture, and that’s the key driver.”

Employees praise Top Mortgage Employer’s benefi ts

For the second year, Mortgages for Business received the coveted Top Mortgage Employer title in the brokerages category, achieving overall employee satisfaction at 86 per cent.

Employees rated the brokerage highly for benefits, earning it a bronze medal in that category, where its o erings include:

• contributing to employees’ pension funds and, in most cases, matching contributions

• 25 days of annual leave as well as paid bank holidays

• long-term service rewarded with extra days of annual leave

• long-term illness provision

• private health insurance and subsidised gym memberships

• flexible family-friendly policies

The multi-award-winning financial services company embarked on a steady cultural change over the past two years, capturing its aspiration of being “the mortgage broker that our clients love working with and our employees love working for.” It has implemented innovative strategies to achieve this.

“It was important to focus on our clients’ trust in us and how our people make a di erence through stressful and challenging events,” says managing director Gavin Richardson. “We wouldn’t be able to create this kind of environment without the right people; that’s essential for us.”

Mortgages for Business’s approach to training the next generation of brokers di erentiates it as one of the best mortgage companies to work for, as evidenced by its bespoke Broker Academy initiative, which resulted in:

• two CRMs progressing to mortgage brokers in the past six months

• four employees receiving their CeMAP qualifications

“It’s really important that the companies are creating a supportive culture to make everyone feel valued and secure in their jobs and also so that people are happy to work together” Ryan Venner, Premier Jobs UK

A psychologically safe environment has been created in which employees can speak freely, accommodate flexible work needs, and work remotely on Wednesdays.

The brokerage bucked the popular fully remote model after the pandemic in the interests of its employees’ mental wellbeing and collaboration.

“You can’t function properly in an organisation like this without your colleagues; you lose all that interaction, and we watched people’s mental health, attitude, and communication skills su er,” Richardson says. “I can’t list flexible working benefits, but we take a flexible view of our employees’ individual needs.”

The organisation has built a reputation for putting clients at the heart of what it does, along with developing and promoting its sta .

“I come from a rugby coaching background; I don’t care about mistakes,” says Richardson. “I care about what you’re doing five seconds afterwards. Don’t worry if you made a mistake. It’s how you put it right; that mindset makes a big difference to people.”

Employees’ industry insights

While each of MI ’s Top Employers 2023 excelled, respondents from across the mortgage industry also gave their feedback on what areas they would like to see improved.

Some of the answers included the following:

• “Get back to focusing on training and developing sta to achieve their goals. Due to the turbulent times everyone

has recently experienced, businesses are being more reactive on a daily basis, which can often detract somewhat from the structured staff development strategy.”

• “Could improve the overall benefits package. By that, I mean pensions and private medical care.”

• “Take part in events to celebrate diversity and raise awareness and acceptance of other people’s backgrounds. From my point of view, it would be nice to see more people employed from the LGBT community.”

• “Activities in the sta breakout areas.”

• “Make it more sustainable for the environment. Add more personality to the o ce as it is very plain.”

• “Have an HR department so all employees are treated the same and there are published HR policies.”

• “More harmonisation, i.e., some have a 37.5-hour week, while others have 35 hours.”

• “We could have better employee benefits and a scheme to do charity work like other firms have. We don’t offer anything really in terms of team and employee wellness, mental health, and charity work.”

• “More opportunities for training and career development. Unfortunately, we are too focused on reductive deadlines that cap these opportunities.”

• “More inter-departmental teambuilding events so that everyone gets to know everyone.”

• “Regular salary reviews with the option for employees to have an input.”

Ryan Venner, managing director of Premier Jobs UK, explains the importance of employers listening to their employees’ concerns.

“It’s really important that the companies are creating a supportive culture to make everyone feel valued and secure in their jobs and also so that people are happy to work together,” he says. “And then obviously, if they’re working well together, they’re more likely to achieve good results, and the business will prosper.”

Servicer

MORTGAGE EMPLOYERS 2023 Top

BROKERAGES

Advancement

Gold LDN Finance

Silver Watts Mortgage & Wealth Management

Bronze Mortgage 1st

Benefits

Gold Watts Mortgage & Wealth Management

Silver SPF Private Clients

Mortgages for Business

Phone: 0345 345 6788

Email: enquiry@mortgagesforbusiness.co.uk

Website: mortgagesforbusiness.co.uk

Compensation

Gold

Master Private Finance

Silver Watts Mortgage & Wealth Management

Bronze LDN Finance

Culture

Gold Master Private Finance

Silver Watts Mortgage & Wealth Management

Bronze Mortgage 1st

Diversity, equity and inclusion

Gold

Master Private Finance

Silver Yellow Brick Mortgages

Bronze LDN Finance

Innovation

Gold Mortgage 1st

Silver

LDN Finance

Bronze Advantage Financial Solutions

Reputation

Gold Master Private Finance

Gold The Mortgage Mum

Silver Mortgage 1st

Bronze Watts Mortgage & Wealth Management

Sustainable programs

Gold Master Private Finance

Silver Yellow Brick Mortgages

Bronze LDN Finance

Overall

Gold Watts Mortgage & Wealth Management

Silver

Master Private Finance

Bronze LDN Finance

LENDERS

Advancement

Gold Landbay

Silver Hope Capital

Quantum Mortgages

Phone: 0190 890 9650

Email: brokersupport@quantummortgages.co.uk

Website: quantummortgages.co.uk

Benefits

Gold Skipton International

Quantum Mortgages

Phone: 0190 890 9650

Email: brokersupport@quantummortgages.co.uk

Website: quantummortgages.co.uk

Bronze Hope Capital Compensation

Quantum Mortgages

Phone: 0190 890 9650

Email: brokersupport@quantummortgages.co.uk

Website: quantummortgages.co.uk

Silver Hope Capital

Bronze Skipton International

Culture

Quantum Mortgages

Phone: 0190 890 9650

Email: brokersupport@quantummortgages.co.uk

Website: quantummortgages.co.uk

Silver Hope Capital

Bronze Landbay

MORTGAGE EMPLOYERS 2023 Top

Diversity, equity and inclusion

Gold Keystone Property Finance

Quantum Mortgages

Phone: 0190 890 9650

Email: brokersupport@quantummortgages.co.uk

Website: quantummortgages.co.uk

Bronze Nationwide Building Society

Innovation

Quantum Mortgages

Phone: 0190 890 9650

Email: brokersupport@quantummortgages.co.uk

Website: quantummortgages.co.uk

Silver Landbay

Bronze Keystone Property Finance

Reputation

Quantum Mortgages

Phone: 0190 890 9650

Email: brokersupport@quantummortgages.co.uk

Website: quantummortgages.co.uk

Silver Landbay

Bronze Keystone Property Finance

Sustainable programs

Gold Keystone Property Finance

Silver Landbay

Bronze Skipton International

Overall

Quantum Mortgages

Phone: 0190 890 9650

Email: brokersupport@quantummortgages.co.uk

Website: quantummortgages.co.uk

Silver Landbay

Bronze Hope Capital

OTHERS (SERVICER, NETWORKS AND TECHNOLOGY)

Advancement

Gold TMG Mortgage Network

Silver HLPartnership

Bronze Phoebus Software

Benefits

Gold TMG Mortgage Network

Landmark Mortgages

Phone: 0125 236 5205

Email: joanne.tripp@chl.org.uk

Website: landmarkmortgages.com

Bronze Phoebus Software

Compensation

Gold

TMG Mortgage Network

Silver Phoebus Software

Bronze Twenty7tec Culture

Gold

TMG Mortgage Network

Silver Phoebus Software

Bronze HLPartnership

Diversity, equity and inclusion

Gold

TMG Mortgage Network

Silver Phoebus Software

Bronze HLPartnership

Innovation

Gold

TMG Mortgage Network

Silver HLPartnership

Bronze Phoebus Software

Reputation

Gold

TMG Mortgage Network

Silver HLPartnership

Bronze Phoebus Software

Sustainable programs

Gold Phoebus Software

Landmark Mortgages

Phone: 0125 236 5205

Email: joanne.tripp@chl.org.uk

Website: landmarkmortgages.com

Bronze HLPartnership

Overall

Gold

TMG Mortgage Network

Silver Phoebus Software

Bronze HLPartnership

ASPIRE TO GREATNESS

Brokers can shine in the current market, believes John Doughty from Just Mortgages. Their knowledge is truly needed by those seeking to buy property, he tells Simon Meadows

Brokers have an opportunity at the moment to be great,” says John Doughty, recently appointed by national brokerage Just Mortgages as managing director for its employed Orion chapter. “In a slightly tougher, more challenging market, people turn to experts for advice. Brokers have got to have a really good knowledge of the market and be able to offer the customer great advice, because that’s what they need right now.”

He continues, “I would say to any broker, know your business, so you can have great conversations with customers and advise them well. You have got to have good communication skills, to get customers to buy into you and appreciate what you’re saying and the knowledge that you have, to trust you to deal with their mortgage.

“People want to deal with people, and because things are changing, becoming more tech-based, you need to retain that human element. Having energy and drive in this business is important, and you’ve got to work very hard. It’s not an easy job being a mortgage broker, and I think it’s clear it’s got harder and harder – you’ve got to want it.”

The drive and the competitiveness that have clearly underpinned Doughty’s rise within Just Mortgages first marked him out for success when he was a schoolboy squash champion with a sporting scholarship at the prestigious Millfield School in Somerset.

“I was quite handy with a squash racket back in the day,” Doughty recalls with some understatement, referring to his place in the UK’s top 20 under 17s. His passion for sport saw him well placed to work on outside broadcasts for Sky Sports after leaving university, where he had attained a degree in video production. But the

DRIVE

John Doughty

Doughty was a schoolboy squash champion

need for a steadier income saw him take his first step into the world of property.

“I fell into work with an estate agency where I lived in Bridgwater that happened to have a sign in the window for a junior negotiator,” explains Doughty. “I went in and got the job and then progressed from there, before moving to a different company, where I ran a couple of branches. A recession hit in 2009 and I moved out of the frying pan and into the fire to become a mortgage broker.”

Doughty joined Just Mortgages in 2010, working as a broker for almost three years before becoming divisional sales manager and looking after the brokerage’s estate agency-based brokers in the south west. He moved into its new build team, as financial services director, where he stayed for just over four years, before being offered his new position as MD of Orion.

In his role, Doughty works closely with more than 90 members of staff – including almost 60 brokers in the chapter – while also liaising with the Spicerhaart estate-agency chains. In addition to helping brokers with their day-to-day activities, he supports them in accessing high-level training and mentoring, as well as exploring progression opportunities.

TALENT

Just Mortgages is the mortgage services arm of Spicerhaart. In total, Just Mortgages has around 650 brokers across the country. A large number of these are in the self-employed division, which is fast approaching 500 brokers. Its in-house training team offers an academy programme that nurtures new talent.

“We moved largely into the affordable housing space about two years ago, and that’s very, very busy because of the Help to Buy scheme now disappearing,” Doughty explains. “This leaves a massive hole. In terms of customers still wanting to buy property, we are still seeing that – it’s in the DNA of British people to own their own homes. There are still people really hungry to get on the property ladder.

“So, what’s the biggest challenge for us overall? The affordability piece. There has to be innovation, which is where you’re seeing shared ownership starting to really gather pace, because it’s becoming an area that’s filling that gap.”

He adds, “Affordability is tough, and people have been

struggling with deposit levels because house prices have increased. It’s about our industry ensuring we are always innovating to give people the best opportunity to get on the housing ladder.”

PRAGMATIC

Doughty remains pragmatic about the market over the next year, refuting any suggestion that the downturn might mirror the financial woes of 2008.

“No, not at all. Lenders have got money to lend, and they want to lend – there’s a massive difference.

“What we have seen is lenders starting to be more competitive on rate. They’ve still got targets they need to hit, and they still need to ensure that they lend enough. So no, it isn’t a disaster market at all. You’ve only got to speak to the lenders, which is what I do. There is a clear appetite to lend.”

He adds, “Developers and housing associations still want to build and provide homes, and lenders still want to provide the finance to allow these people to buy their properties. At Just Mortgages, we definitely want to sit in the middle and make it work.”

What keeps Doughty engaged, this far into his career?

“I think the way you treat people in this industry is really important – to be a leader, not a manager as such,” he shares. “When I look back at my career, the proudest moment I’ve had is seeing brokers who have joined me become the number one in Just Mortgages, and being up here at industry awards, that’s been fantastic.”

He concludes, “Let’s not forget that what we do is about enabling people to buy their own homes. If we do the job well, then we’re going to give people the opportunity to get on the housing ladder, and it’s a rewarding career from that perspective.” M I

“I would say to any broker, know your business, so you can have great conversations with customers and advise them well.… you need to retain that human element”

JOHN DOUGHTY, JUST MORTGAGES

Doughty relaxes with his family outside of work

Consumer duty – what’s the impact on your clients?

IS THE GROWTH OF HOLIDAY LETS AN OPPORTUNITY?

the best deal.

The Financial Conduct Authority’s (FCA) new consumer duty came into force on 31 July, and it is having a significant impact on intermediaries as they review their service proposition and processes.

Most intermediaries are likely to consider that they already conduct business in line with the duty. After all, their USP is, and always has been, providing excellent service and achieving good customer outcomes. But, as the FCA itself has described it, the duty represents a “paradigm shift,” requiring brokers and advisers to go beyond simply acting in a client’s interest. Instead, they must deliver a higher standard of customer care, and proactively take steps to evidence the delivery of good outcomes for retail customers and consider all potential scenarios to avoid unfair outcomes.

However, it is prudent to recognise the burden the duty places on intermediaries, especially at a time when profits are being squeezed by wider socioeconomic conditions. We are all in business to do the right thing for the customer, but also to make a profit. Any increased administration will inevitably lead to a need to increase income. However, commission, and particularly recurring commission, will come under greater focus as insurers and providers now also have to evidence that the remuneration to agents is fair for the value and services they bring to the customer.

A report by Generation Rent in June this year revealed that holiday lets represent around four per cent of growth in housing stock nationally, with 26,043 second homes or commercial holiday lets registered between 2019 and 2022.

This offers brokers and advisers with the right GI relationships the chance to help clients source the right cover, as a standard home or buy-to-let policy will often not be a suitable product type for these clients.

Holiday lets are not quite as easy to insure as standard home or buy-to-let properties. They are typically seen as a higher risk than standard policies because there can be frequent and sometimes longer unoccupied periods and they have multiple short-term occupancies.

Don’t miss out on this growing opportunity. Check whether your GI provider can help you access the most appropriate products and cover for your clients with holiday lets. And if they can’t, switch to one that can.

BUILDING LOYALTY IN TIMES OF CRISIS

As the cost-of-living crisis continues to dominate the lives of almost everyone in the UK, homeowners have been reducing, or in some cases cancelling, their insurance cover in a bid to keep costs under control.

Recent research from Fair4All Finance in April found 49 per cent of those in financially vulnerable circumstances, equating to 8.6 million people, said that increasing costs affected their ability to afford insurance. Additionally, a recent ABI survey found only 57 per cent of respondents felt they were getting

This is not great news for intermediaries, from both service and retention points of view. So how can brokers and advisers retain customers during this sustained economic downturn?

The key is to focus on value, not price. This might seem counterintuitive when price might appear to be the main factor in policyholder decision-making, but bear with me.

A customer may well consider switching to a cheaper policy they find on an aggregator site. But they could be leading themselves down a rabbit hole that will cost them more in the long run, as they may find a cheaper policy doesn’t have the cover they really expect – many clients think all household policies are the same, but we know they aren’t. Don’t let this happen; customer loyalty will be improved by proactively engaging with clients at renewal, pointing out any holes in cover they could be exposing themselves to with cheaper policies, as well as the risk that poorer-quality wording could play to their detriment in the event of a claim. Those brokers who are most successful at retaining clients have access to productcomparison tools like Defaqto, as these can really make a difference in assisting you as you compare and highlight the differences in cover – enabling you to demonstrate the value in the cover, rather than focus just on the price.

Not all policies are built the same. Make sure you can access a wide range of policies, so you can always present your clients with solutions that deliver the best-quality cover at the right price. Do this, and they’ll remain loyal even when times are tough. M I

Geoff Hall chairman, Berkeley Alexander

Remaining agile in times of exceptional market demand

so it’s good to see that advisers are now capitalising on this opportunity, too.

The previous year has seen an incredible amount of to-ing and fro-ing in the mortgage market. Frequent rate changes, the cost-of-living crisis, and the introduction of new regulatory responsibilities in the form of the consumer duty have all combined to affect and disrupt consumers and advisers alike.

Such significant changes make it all the more important for businesses to keep their fingers on the pulse to understand how advisers are feeling and how they can best support them in doing their jobs.

We know that these recent market fluctuations are putting a huge strain on advisers’ time, and that they are concerned about ongoing market instability.

This is supported by the findings in our annual Adviser Survey, conducted in July with 526 advisers. The survey has shown us that a huge two-thirds of advisers are saying they’re most worried about interest rate rises, up from a third just one year ago.

We’re seeing the aftershocks of this rate turmoil reflected in the growth of opportunity around product transfers over the last 12 months. One-third of our respondents identified this as the biggest growth area for their sales, up from just five per cent the previous year.

This aligns with recent data from UK Finance highlighting that a huge 84 per cent of remortgage deals in Q2 of this year were internal product transfers. This is something that many in the sector have expected for a while,

Given the rise in product transfer sales advisers are seeing, it’s clear that many existing mortgage customers are looking for advice on the best mortgage deal for them, alongside the usual demand from first-time buyers. And this desire for advice isn’t exclusive to mortgage deals. We’re seeing this appetite for expertise applied to financial products across the board, including general insurance (GI).

Almost three in five advisers (57 per cent) in our survey state that their clients are actively seeking advice on general insurance, with over half of that group saying they’ve noticed an increase in demand within the last 12 months.

However, it’s also clear that advisers are facing more barriers when it comes to offering GI. Our survey also highlights that whilst 92 per cent of advisers recognise that offering general insurance is best practice, 60 per cent still admit to sometimes missing this opportunity – in part due to the intensity of recent market fluctuations and not having the bandwidth to manage this demand appropriately.

We believe it’s really important that advisers get into the habit of offering GI advice to help them remedy this gap. It’s clear that the willingness is there, but we also recognise that either the confidence or the time (or both) to do so may not be. To this end, we’re working hard to reduce some of the burden on advisers and ensure that they’ll still be able to offer their clients access to the quality advice they seek, where they’re unable to provide this service themselves.

We have recently launched our referral proposition, which allows time-stricken advisers to refer their customers to Paymentshield’s in-house sales team whilst retaining full oversight of the process. When using this service,

advisers can now offer customers a call-back from our team, who will get in touch during the specific time slot requested by the customer.

This has worked to great success so far, and initial trials with firms from across our partner network have had an average quote-to-sale conversion rate of 65 per cent when our team called the customer and discussed their needs.

Support is out there, and we’ve been clear in communicating to our network that we’re listening to demands and working on solutions that ensure our advisers and their clients can continue to deliver and receive that quality of care that is essential, particularly in the face of a turbulent economic outlook.

We’re really proud of what we’ve done so far, and it’s worked very well. But we’re dealing with, and responding to, constant flux in the market, so it’s never a finished job.

We’ll continue to take these temperature checks of the sector and check in with advisers whenever possible to ensure we’re providing suitable, workable, and scalable responses to the issues they’re facing.

Emma Green distribution director, Paymentshield

With interest rates as high as they are, defaulting to a remortgage for capital raising is no longer cut and dried

Tony Marshall CEO, Equifinance

Figures from the Finance & Leasing Association (FLA) indicated reduced lending figures in April and May compared with the same months in 2022, although June showed a three per cent increase year on year, looking at the overall scene. However, second-charge lending is still ahead of its first-charge sibling in percentages (if not in like-forlike volumes).

Currently, the mortgage market is in a slump, and according to a recent report, the number of property transactions fuelled by the mortgage sector has fallen by 42 per cent so far this year. So why is the second-charge market still relatively buoyant in comparison?

Let’s look at the basics. Your clients are as safe in a second-charge mortgage as they would be in a first mortgage, because it falls under the FCA’s oversight and has done for over five years. Apart from some procedural differences, the same rules apply to both first- and second-charge mortgages.

We understand customers do not suddenly get out of bed one morning and say, “I need to borrow more money.” That doesn’t happen. Some event occurs in their lives that creates a need, and whatever that need is, the customer then seeks a solution.

So, they start a process, usually

attempting to seek an unsecured solution, in which they might be disappointed to find that there are limited offerings, or only ones at high cost. Alternatively, they may find that the need can only be satisfied by a mortgage product, and they contact their adviser. A remortgage might be advised, and, in most cases, is completely satisfactory. However, there are likely to be situations in which this is not the best outcome.

Let’s explore this for a moment:

1. The rate on their current mortgage is low, and, as we know, rates have risen significantly. Do they really want this option? Is it in their best interests to reschedule the entire balance plus additional borrowing on to a higher rate?

2. The purpose of the loan may be less palatable for first-charge lenders.

3. There may have been some deterioration in their credit profile due to a life event.

4. They may be subject to ERCs that create a potentially large switch cost to get out of the existing mortgage.

5. Their first-charge lender may only allow further advances on an advised basis through their own advisers. Has anyone tried to book an appointment for this?

6. They may want to borrow this amount over a different term than the first.

7. Speed – are they in a rush for whatever reason?

8. Their employment is complex. All these circumstances may be satisfied by a secured offering. The

second-charge industry, small (but growing) though it is, has developed products over the years to suit most circumstances, at rates that are comparable to firsts at the prime end of the spectrum.

What is the regulator’s view? Their overwhelming focus is on the customer being advised appropriately, and the adviser is duty-bound to identify the best solution. That’s not our job as lenders. We are here to provide solutions to you and your clients that are fit for purpose, at the right cost, in the most appropriate way to help you with that. It’s for you as the customer’s adviser to decide what’s best for your customer.

Decades of low interest rates meant a remortgage could look particularly attractive for capital-raising when making a lender swap on a like-forlike basis. That is no longer the case. Leaving aside legitimate concerns of having a client absorb the cost of an ERC, many capital-raising clients will need far more persuading that swapping a perfectly good and cheap first-charge mortgage for one that costs considerably more is a good idea, even if it does give them the extra funds they asked for. Frankly, so will the regulator.

In comparison, a second-charge leaves the original mortgage in place and the client knows that the loan is fully under their control to pay off – again, without disturbing the valuable first-charge mortgage.

Perhaps consumer duty will persuade more advisers to give second-charge lending proper consideration. We’ll have to wait and see! M I

Open banking – aiding affordability and tackling fraud

on a number of levels.

From the food in our shopping baskets to our monthly energy bills, we don’t need to look far for evidence of increasing costs. The rate and pace, however, at which some borrowers’ outgoings are rising is adding another layer of complexity, for some providers, to calculating affordability.

While all lenders assess affordability differently, as a general rule, the starting point is looking at a borrower’s income and monthly outgoings. When monthly outgoings are fluctuating as much as we are seeing now, with annual food increases of around 17 per cent, this can make affordability harder to ascertain, with some lenders erring on the side of caution.

For lenders who rely on data from the Office for National Statistics (ONS) for affordability purposes, there is a risk that this blanket approach to a borrower’s expenditure may portray their affordability in too negative a light.

Assessing affordability can be even more challenging for a borrower who might already be in some form of debt. Bank of England figures show interest rates on some credit cards have reached record highs these last few months, in line with an increasing bank base rate (BBR).

As lenders, we find that open banking allows us to look into the real-time spending and outgoings of a borrower, and this can help paint a more accurate picture of affordability

We can see the most up-to-date figures on everything from childcare to eating out, as well as credit card and loan commitments, and assess how much these have increased. The same applies to a borrower’s income; if they have taken on a second job or additional work to help cover increasing costs, we can see all of that in real time.

We can also assess discretionary spending and identify whether the borrower has cut down on this, or vice versa. Open banking also allows us to spot trends and patterns in a borrower’s spending and saving, and this can also help when identifying whether a second-charge debt consolidation mortgage might prove beneficial.

COMBATING FRAUD

As well as helping assess affordability more accurately, another reason why we anticipate open banking will become more widely used in the coming years is that it eliminates the need for the borrower to relay all of their outgoings themselves.

As the cost-of-living crisis continues to put financial strain on borrowers, prospective clients are looking to present themselves in the best possible light for affordability. Either intentionally or unintentionally, this may lead to omissions on the client’s part. Open banking leaves no room for error and can considerably cut down the time it takes to determine a borrower’s true financial make-up and identity.

Also, while no system can eradicate fraud entirely, open banking can certainly help. The mortgage market has been particularly busy these last few months, with rising interest rates and lenders pulling products. It

is usually in such times that we see some fraudsters try their luck, in the hope advisers and lenders might be distracted.

Even before we saw many of the troubles in this year’s market, in its 2023 Fraudscape report, fraud prevention service Cifas reported false applications were up 40 per cent last year, with 23,819 such cases recorded in 2022. It noted increases within the bank account sector, mortgage sector, asset finance, and loans. False documents accounted for 39 per cent of false applications – rising by 109 per cent compared to 2021.

Interestingly, it also found 77 per cent of false applications came through online channels, with a large proportion of documents identified in false applications being utility bills (40 per cent), followed by bank statements (22 per cent).

Identity fraud was another area of huge concern, with attempts rising by nearly a quarter – 23 per cent – in 2022. Cifas says identity fraud cases have now reached an unprecedented level, accounting for 68 per cent of cases in 2022, with current address fraud making up 74 per cent of cases.

Open banking can help eradicate these risks by allowing lenders to access a borrower’s financial data directly from the source. This not only allows for a secure digital identification process, but also speeds up the application submission, doing away with paper-based bank statements and the attendant threat of forgery.

As the mortgage and second-charge industries become increasingly aware of the benefits of open banking, we expect it to make further inroads, especially in light of the current challenges surrounding affordability and the heightened threat of attempted fraud. M I

Susan Baldwin interim head of lending, Evolution Money

Broadening our product range to accommodate demand for mortgage options

until then.

If you were to write one of those word-clouds for the buy-to-let and private rented sector (PRS) covering 2023, I suspect not far from the middle in bolder, bigger text would be the so-called “landlord exodus.” A quick Google search reveals a growing number of articles focused on this apparent event.

There is a general undercurrent of feeling that landlords are increasingly likely to be selling up, due to increased mortgage costs and affordability challenges, increased taxation, and more responsibility being placed upon landlords in a number of key tenant- and property-focused areas.

It would be naïve to deny the above, but what we need to distinguish here is whether portfolio or professional landlords are following the same course (that doesn’t seem to be the case) or this is more the preserve of those with one or two properties at most. And, if the pros are selling up, are these properties moving out of the PRS? Answer: Not really, because there is a very clear difference between the two – not just in how they might have entered the sector, but also in terms of how they want to leave it, and along what timescale. Also, there is an understanding that the current position will not last forever, and it’s perhaps more important to understand where the sector might be in the next few years than where we currently are – especially if finance arrangements are not up for renewal

Portfolio landlords, for example, are highly unlikely to be considering selling up wholesale at the moment. However, what they are likely to be looking at is the performance of every single property within their portfolios, particularly those mortgaged properties that could be relatively close to the end of their special rates.

Experienced players with larger portfolios will also know that one or two properties that are not delivering the income or yield they used to, or that have higher mortgage amounts or monthly payment requirements, are not necessarily ripe for the chop, either. That’s because the overall portfolio can stomach some of these properties that are not performing as they might because of the depth of the investments across the whole.

Advisers should also factor in the motivations for landlords who may have such properties within their portfolio. For instance, house prices have dipped from their highs of 12 to 18 months ago, so even if rental performance in relation to mortgage costs is a slight concern, that doesn’t necessarily mean now is the right time to sell.

Instead, it may be worth opting for a short-term mortgage deal, or indeed a variable option that comes with no ERCs, to give landlords a degree of flexibility with their properties.

While in recent years the go-to product choice for many landlords has been the five-year fixed, over the next couple of years this might not be the most suitable option. Last month we relaunched two-year fixes, and we also offer both trackers and green trackers –for properties already at the EPC A-C level – which don’t come with any

charges, and therefore provide landlords with an opportunity to move, should the market shift in the direction they want it to.

It’s all about understanding the existing circumstances for landlord clients, what their plans are for the future, and how those might best be met. For example, being able to hang onto the property for a couple more years might make all the difference in terms of the capital appreciation that could be achieved, given any future increases in house-price levels.

Few professional and portfolio landlords would want to sell a property during a price dip, especially if they believe the many economists who think this current dip is not likely to continue for the longer term.

Indeed, there are a large number who believe prices will start to rise, as inflation stabilises and we see subsequent stability in interest rates. If that is the case, then holding onto a property could be the best short-term option.

We suspect there are many portfolio landlords currently weighing up their options – as mentioned, not across their entire portfolios, although they of course take this into account, but in terms of individual homes that may require a specific short-term mortgage strategy, after which they can see which way the wind is blowing. So, clearly, mortgage options – of as many varieties as possible – are always going to be in demand.

One might say that we’re going through a “landlord recalibration,” with existing players seeking to work out what they need to do now in order to make their exit strategies workable in the future. It’s up to us to help them do that. M I

Steve Cox chief commercial officer, Fleet Mortgages

Despite uncertainty on policy proposals, going green offers opportunities

Richard Rowntree MD, Mortgages, Paragon Banking Group

Since changes to private rented sector (PRS) energy efficiency standards were announced in 2020, I’ve stated how we support efforts to improve the sustainability of the UK’s housing stock, but have also highlighted how the proposals pose a sizable challenge for landlords.

One of the main issues concerns the proposed timescales, so Levelling Up Secretary Michael Gove all but confirming that the policy change would be delayed is something of a small victory.

When we consider the task facing landlords – around 60 per cent of England’s 4.8 million rental properties are currently rated below EPC C – it’s pretty clear that they need more time to comply with the new regulations, which will require dwellings let under new tenancy agreements to meet EPC C or above by 2025; this will extend to all PRS properties by 2028.

Let’s imagine that the new standards were confirmed on 1 September this year and set to come into force on 1 April 2025. This would leave landlords with 606 days to bring the approximately 2.5 million homes currently in EPC band D or below up to the new standards. To achieve this, landlords would need to make 4,125 properties more energy efficient every day – more if we don’t include weekends and bank holidays.

And this is just the current picture.

Research undertaken for our recently published report The rental sector energy challenge found that half (52 per cent) of the 1,200 landlords we spoke to have at least one property that has an EPC certificate that will expire before 2025. This means that it’s quite possible that the actual number of properties that will need to be upgraded is higher.

So, while it was good to see Gove acknowledging the pressure being placed on landlords, stating that “we’re asking a little too much of them and therefore we will give them a greater degree of breathing space,” the lack of any official announcement means that landlords are no clearer on when the proposed policy change will happen and how it will affect the sector.

While this lack of direction has understandably left some landlords reluctant to act until they know more, there is evidence that others have already been influenced by the proposals.

According to our research, homes that already meet the new standards have been purchased by 15 per cent of landlords as a result of the proposed policy change. This is a continuation of the progress made over the past decade as the number of properties with an EPC between A and C has increased by 165 per cent to 1.92 million due to landlords injecting more sustainable homes into the sector.

Landlord investment is also helping to address the burning issue of the proportion of homes already in the sector that currently fall short of the proposed new standards. One in ten (10 per cent) landlords are purchasing homes that fall into EPC band D with the intention of carrying out works to enhance their green characteristics; just

under one in five (19 per cent) have already done this, and a further 14 per cent are currently in the process of doing so.

If the proposed policy change is a stick with which to beat landlords into being more environmentally friendly, there are also some carrots acting as incentives.

Thirty-eight per cent of landlords told us that attracting better tenants is a key motivator in improving the energy efficiency of their portfolios. Just over a third (35 per cent) identified reduced energy bills for tenants as a benefit, aligning with English Housing Survey (EHS)’s Energy Report analysis that estimated that PRS properties could benefit from average energy bill savings of £276 per year after being upgraded to EPC C. The same proportion felt that increases in capital values make upgrades worthwhile.

We see that, regardless of the regulations, it makes sense to be more sustainable, ethically and financially. But with EHS estimates placing the average cost to improve a home to EPC C at £7,737, realising these benefits will often require significant initial investment. We’ve also heard stories of measures such as insulation being installed only to be removed after posing safety risks, highlighting the need for support to help landlords upgrade their properties economically, effectively, and, most importantly, safely.

This shows that the need to go green presents opportunities for the sector, and reducing the carbon footprint of portfolios operated by both new and existing landlords forms part of Paragon’s strategy. This will see us build on the support we already offer landlords as we work together to create the sustainable homes of the future. M I

Recognising key workers’ housing needs

Grant Hendry director of sales, Foundation Home Loans

When it comes to millions of mortgage borrowers, the notion of a one-sizefits-all product offering suitable for their wants and needs quite frankly doesn’t fit at all.

The years of “one mortgage to rule them all,” so to speak, which homeowners had no choice but to accept forty or fifty years ago, actually seems like another world now, particularly when we consider how many people would not fit into that very narrow band of those deemed worthy of lending back then.

Even with all the progress made in terms of moulding a lending or product offering to different borrower demographics, many people still find themselves surplus to requirements by the high-street lending fraternity.

However, out of this we do have a specialist lending sector that offers a growing degree of product choice to a much wider range of people who do not meet vanilla criteria and are looking for products and support much more in tune with their own specific needs.

One of those demographics of which, years ago, it would have seemed unfathomable that they wouldn’t be able to secure the mortgage financing they need from banks and building societies is key workers.

It’s fair to say they are the heartbeat of their local and regional communities, and given the nature of the work, the certainty of employment for many, the pay structure, etc, three to four decades ago, there would have been little issue with them walking into their local branch and getting a mortgage.

Much, of course, has changed since then – not least house price levels in many areas, combined with pay rates staying relatively stagnant, meaning many key workers have found themselves either priced out of the areas within which they are required, or simply unable to get mortgage financing from what we might call traditional sources.

We should not underestimate what a significant impact this can have on the ability of key workers to work, and on the services they provide. Run through the local news in some areas –particularly inner cities but also those villages and towns that are tourist hotspots – and you will see what a challenge it is for local key workers who may a) feel priced out, and b) not be able to secure the loans they need.

This is why we at Foundation recently launched a specific key-worker mortgage product range. Whether they are first-time buyers, home-movers, or looking to remortgage, we know that many key workers are undoubtedly excellent mortgage credit risks. However, using traditional income multiples from the high street can only get them so far.

It’s why we launched a range specifically for them that comes with enhanced loan-to-income (LTI) limits for those who fit within eligible key-worker professions, because many borrowers in the category need that extra lending support.

Whether your client works within the armed forces, NHS, Fire Service, education, or police or prison services, if they are unable to secure the mortgage they need through banks or building societies, advisers with such clients can come to Foundation and find finance.

What is often forgotten here is just how stable and low-risk many of these key-worker borrowers actually are.

To say there is stable employment within such public sectors is an understatement, but it’s also the case that – certainly over the last decade –income and pay levels have not kept pace with inflation, and therefore getting over the affordability criteria on “normal” LTI assessments is not achievable.

Again, this is all about recognising a specific borrower demographic that is currently being underserved and tailoring a product proposition to it. For a number of years, we’ve offered a similar proposition for professionals – those who are likely to see their incomes rise throughout their careers and who are, again, in strong and stable employment, but who might not be at that level just yet.

For us, as with key workers, professionals are a good credit risk, and it is often by taking an individual approach to underwriting with such borrowers that you can see just how strong their finances are, how they will be able to meet these payments going forward, and how they are likely to progress in their careers.

There has to be a recognition of the housing desires and, indeed, needs of both key workers and professionals in order to keep them working in those sectors that are so vital to the functioning of our society.

If we learnt nothing else from the pandemic, we should at least now know just how important these people are for all of us. If they are not able to live close to their workplaces, if they are priced out or unable to secure the mortgage finance they need, then this presents difficulties for the wider population.

We would urge advisers with such clients to look at the specialist lending options available and to use our expertise in this area to help and keep these very important individuals on the housing ladder. M I

Have you got to grips with consumer duty?

Stuart Wilson dchairman, Air Club

Over the summer we passed the 31 July deadline for the introduction of the consumer duty. I suspect (and hope) that, in the intervening weeks, we have been trying to get to grips with advising within this new environment.

It’s hard to believe that 12 to 18 months ago, nobody was prepared for consumer duty. That point about what some advisers believe remains pertinent, because they are likely to be the ones who haven’t engaged with the new rules, haven’t made any changes, and haven’t looked at what the FCA wants, and are therefore walking an increasingly thin tightrope of compliance.

Indeed, if you think consumer duty hasn’t and doesn’t apply to you, then you are labouring under some sort of grand delusion that will eventually come back to bite you. The FCA might not be immediately in enforcement/ punishment mode for this regulation, but they will get ‘round to us eventually and they will expect to see your “workings out” and your answers.

One point to focus on is the nature of how consumer duty will be reviewed, not just in terms of cases post-31 July but also what might have come before. At a recent “Breakfast with Stuart” meeting, the Financial Ombudsman Service (FOS) was mentioned in the context of the new rules.

It was suggested they are already looking at the complaints they receive in the context of consumer duty – through a duty lens, you might say – and advisory firms might not necessarily be aware of this.

I’m not saying that we need to be looking over our shoulders constantly, and indeed there is a strong argument to suggest that this type of retrospective reappraisal of advice within the context of rules that were not in place at the time is deeply disingenuous and, quite frankly, unfair.

However – and I think we would all recognise this within the later-life sector – that can happen. The perception that old cases could and should be reviewed in the context of up-to-date regulatory rules will be there for some people, and that could cause issues for firms – specifically those who have made no changes and who have perhaps suggested they were already compliant with consumer duty long before it was introduced.

My expectation when it comes to the duty is that, having looked at the rules within the context of an advisory business, I would anticipate changes in at least half a dozen areas, and that being able to evidence these changes and the difference they have made to consumer outcomes/delivery of advice will be crucial.

One key area, as always, is customer communication and – again, with that focus on positive outcomes for consumers – the need to be in regular contact with a client, highlighting up to date issues for them to potentially address, and the opportunities that might now be available to them.

Much like we have talked about potential vulnerability, and the fact a client might or might not be vulnerable at different times, client circumstances can shift, sometimes very quickly. Certainly over a 12-, 24-, or 36-month period, there is a greater likelihood that the situation the client was in at the initial point of advice will have changed, and advisers need to be fully aware of that.

But how do they do that if they

are treating the client as a one-off transaction, to be reviewed only (potentially) when the deal is coming to an end? The simple answer is they can’t, and I’m therefore suggesting (and anticipating) that advisory firms will already have a process in place whereby they are regularly in contact with clients.

This is absolutely vital for many reasons, but certainly when it comes to checking in on a customer, and certainly when it comes to determining whether they are now able to service interest on a lifetime mortgage or make a capital repayment. Customers who, at the time of initial advice, might have turned this option down might well be in a position to make those payments later on, and indeed often want to as they review the roll-up of interest and what it actually means for retained equity within a property.

Regular later-life client engagement is no longer a nice-to-have. Indeed, I’m not sure it ever was, but certainly with consumer duty, not to have this in place is inadequate, especially when we have technology that can easily prompt you to do this – to flag a reminder, allow you to document the engagement with that communication, and understand whether it was or wasn’t opened, whether it was received and replied to, whether the client requested more information, etc.

At the very least, it provides the adviser with a much more robust client file that could be presented to the ombudsman should there ever be any complaints that focus on postcompletion, ongoing servicing, etc. In a very real way, if you follow the consumer duty rules, you will effectively have all manner of evidence that you have done a “proper job,” and along the way, you might also pick up extra business and be able to place your client in a better position than they were in when you first gave them advice. M I

My fi rst deal

Iwill have been with Just Mortgages for 18 years, as of November this year.

My dad was a carpenter, so I originally wanted to follow in his footsteps. I quite quickly realised that I didn’t have the knack for carpentry, shall we say.

I left school, went to college, and did a national diploma in business and finance because I thought that would give me a broad spectrum of options. My best friend at the time worked in London, and it seemed like quite a logical step to go there, too.

I guess I was lucky to fall into a back-office role in the City, where I had access to the traders. So I worked my way up. I worked in the City as a currency trader in the late 90s and early noughties. It was very exciting and had its challenges, but it didn’t feel real.

I got made redundant in 2003 and, as it was a shrinking industry at the time, I started looking around for the next thing that I could do that was going to give me a similar living to what I had been earning in London.

Mortgages sprang to mind. I applied for a job with Mortgages Direct, as it was at the time, which is now Just Mortgages. I was brought on board as a trainee and spent the first three or four months learning the job, shadowing someone, and learning estate agency work as well, since it was an estate agency-based brokerage.

I do remember well the first-ever mortgage I did, at our office in Bar Hill, near Cambridge. It was in 2004 and I was 31. The clients were a late-middle-aged couple, and it was a residential mortgage to purchase a 1960s three-bed semi-detached property in Swavsey, Cambridgeshire.

He was self-employed and she had an office job. They were council tenants on a lower income. It had taken them a long time to get to the position where they were ready

to move forward and buy.

I was incredibly nervous because it was my first time, and I was being observed. Even now, I still get nervous every year when you have your compliance observations – that’s a feeling that never leaves you.

As it was my first application process, I was supervised by my manager. I always remember that it was at six o’clock in the evening when the couple came in, because they had been working. The office was in a row of shops, and next door was a fish and

in the end, and there was a positive outcome – the mortgage was approved. It was exhilarating because I was finally doing what I’d really wanted to do and had been trained to do. I felt relief, to be honest, to get it over the line.

I phoned the couple to tell them the good news – I still phone people to tell them as much as I can. They were so grateful because they had waited for many years. You’ve got to enjoy that part of the job, because it is changing people’s lives.

About seventy per cent of my meetings with clients are in person. I love to meet people, and when it’s something as big as a mortgage, I think you still need that human element. If you’re not good at being able to talk to people, it is a very hard job, but I love it every day – particularly, still, the exchange of contracts and completions.

chip shop. Nobody had had any dinner and the fish and chip shop was frying.

We did the mortgage paperwork and that was fine, and we came to the protection insurance part, but there were a lot of health issues. So I was filling out the protection application and it just went on and on because virtually every question we asked they were saying yes to, and then there were further questions.

My manager at the time was one of those who didn’t just sit back and observe – he liked to get involved, and he was chiming in with his opinions. So, it just kept going on and on, it got later into the evening and the smell kept getting stronger – the place stank of fish and chips! Everyone was sitting there getting more and more hungry, and it just seemed to go on forever that evening. It just sticks in my mind for that reason.

We got there with the protection insurance

Today I am based in Suffolk and write about 220 mortgages a year. I do a lot of shared-ownership and affordable-housing mortgages through relationships I have built up over the years with housing associations.

I think the days of sitting back and waiting for the business to come to you have passed, at least for the moment. We also have to educate customers that today’s higher rates are the new normal.

I would say to anyone joining the profession now, take the time to learn the job properly. Be patient. Don’t take for granted that you’re going to get leads and that people are going to come back and do their mortgages with you again. It’s still a rewarding job, but you’ve got to put the effort in to be very successful these days.

I still vividly remember that couple for whom I did that first mortgage. You’d like to think they have paid it off it by now – well, they must be getting close! M I

“Everyone was sitting there getting more and more hungry”

MATT TILBURY, JUST MORTGAGES

Matt Tilbury, executive mortgage & protection adviser at Just Mortgages, recalls the first mortgage he wrote – and how there was something distinctly fishy about that momentous event at the start of his career ...

Matt Tilbury

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