Mortgage Introducer June 2022

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

June 2022

 Mortgage market round table  Workplace culture  Specialist finance

GREEN LIGHTS? Helping clients navigate EPC regs and cost-of-living issues

Mortgage Insider is back

Every episode brings you the insight and analysis you need to successfully navigate the market.

£5

F le xib le

solutions for your residential cases We know no two residential cases are the same and that’s where our flexible criteria could help. Our underwriters manually assess each and every application with a common-sense approach and willingness to lend. For our BDMs our standard criteria is only the starting point of the conversation and they’re empowered to discuss your cases even if they don’t quite fit.

Up to

95% LTV

So get in touch with us today to see why we’re the home of...

andcrafted

Call us today on 01634 888260 or visit krfi.co.uk to find your BDM. FOR INTERMEDIARIES ONLY. Product and criteria information correct at time of print (25.05.2022).

No maximum LOAN SIZE

Complex income

SOURCES CONSIDERED

EDITORIAL

COMMENT

Managing Editor Paul Lucas paul.lucas@keymedia.com Deputy News Editor Jake Carter jake.carter@keymedia.com News Editor Richard Torne richard.torne@keymedia.com Content Editors Kel Pero Roslyn Meredith Commercial Director Matt Bond matt.bond@keymedia.com Advertising Sales Executive Jordan Ashford jordan.ashford@keymedia.com Campaign Manager Amie Suttie amie.suttie@keymedia.com Campaign Coordinator Raniella Alonzo Production Manager Monica Lalisan Production Coordinator Loiza Razon Designer Joenel Salvador Head of Marketing Robyn Ashman robyn.ashman@keymedia.com

Key Media Signature Tower 42, 25 Old Broad Street Tower 42, London EC2N 1HN www.keymedia.com London • Toronto • Denver Sydney • Auckland • Manila • Singapore Mortgage Introducer is part of an international family of B2B publications, websites, and events for the mortgage industry CANADIAN MORTGAGE PROFESSIONAL cmpadvertise@keymedia.com MORTGAGE PROFESSIONAL AMERICA mpaadvertise@keymedia.com MORTGAGE PROFESSIONAL AUSTRALIA claire.tan@keymedia.com AUSTRALIAN BROKER simon.kerslake@keymedia.com NZ ADVISER alex.rumble@keymedia.com Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.

Mortgage’s climate catastrophe

W

hen it comes to headlinegrabbing stories, senior HSBC banker Stuart Kirk’s recent outburst about climate change took the term ‘clickbait’ to a whole new level.

During a speech at the FT’s Moral Money conference in London in May, he branded environmental activists as “some nut job[s] … telling me about the end of the world” and commented, “Who cares if Miami is under six feet of water?” in reference to catastrophic floods.

In Kirk’s opinion the focus needed to be squarely on the here and now – namely inflation and the cost-of-living crisis. Thinking about climate change and what’s going to happen in 20 or 30 years was, in his view, “completely out of whack.”

They may have been shock statements – and indeed he has since, reportedly, been suspended – but there is a genuine risk that the mortgage industry could follow his lead and lose track of the long-term picture to focus on short-term predicaments.

Yet in a separate development during May, the Bank of England published

the results of its Climate Biennial Exploratory Scenario exploring the financial risks posed by climate change.

It concluded that UK banks were likely to be able to absorb the costs of transition that fall on them, adding that the overall costs will be lowest “with early and well-managed action to reduce greenhouse gas emissions.”

The message of early action needs to be put across to consumers, too – especially to landlords needing to ensure their properties meet the EPC C rating threshold by 2025.

No matter where you stand on the climate change debate, ignoring its potential financial impact would be foolhardy at best, and catastrophic at worst. Green mortgages are taking off, and loans against properties that are not climate-ready risk massive losses in equity. Now is the time to account for environmental risks and to spread the word to consumers, too – or risk being green with envy as other businesses reap the rewards of cleaning up their acts.

Paul Lucas

For straightforward buy to let criteria precisemortgages.co.uk FOR INTERMEDIARIES ONLY

www.mortgageintroducer.com

JUNE 2022 MORTGAGE INTRODUCER

1

MAGAZINE

WHAT’S INSIDE

Contents 5 8 10 11 14 16 22 25 26 28 30 31

44

Market review London review Networks review EDI review Recruitment review Technology review Buy-to-let review Residential review Service review Protection review General insurance review Conveyancing review

32 Round table: Mortgage market facing an uncertain future MI, in association with Barclays, spoke with experts about what may lie ahead 38 Upping the ante on climate change Newly formed advisory group urges sector to pull together 40 Interviews MI talks with Karen Rodrigues of eConveyancer and Rachael Hunnisett of Skipton Building Society

SPECIALIST FINANCE INTRODUCER

24

15

BREAKING GLASS CEILINGS

17

29

NEW BLOOD NEEDED

42 Loan Introducer What’s happening in the second charge market 45 Specialist Finance Introducer Updates from the world of development finance and later life lending 47 Feature: Workplace culture The culture of the office must respond to the working world

21

CRMs AND EFFICIENCY

2

MORTGAGE INTRODUCER JUNE 2022

www.mortgageintroducer.com

FEATURE IN OUR NEXT SUPPLEMENT Put your brand at the forefront of the UK specialist finance market by supporting one of Mortgage Introducer’s upcoming guides.

Here’s what’s coming up in 2022...

BUY-TO-LET

LATER LIFE LENDING

TECHNOLOGY

ADVERSE CREDIT

SPECIALIST FINANCE

CONTACT US JORDAN ASHFORD Advertising Sales Executive jordan.ashford@keymedia.com M 07 539 529 739 T +44 203 868 3406 ext. 112

MATT BOND Commercial Director matt.bond@keymedia.com M 07525 456869 T +44 203 868 3406 ext.123

REVIEW

MARKET

Snapshots of 2022 so far Craig Calder Director, mortgages, Barclays

W

hisper this quietly, but we’re fast approaching Q3, the Platinum Jubilee celebrations, and the summer holidays. We are also operating in a mortgage/housing market that continues to see sustained demand from a range of borrowers.

It’s true that when compared to this time last year, these levels are obviously far lower – but chunks of 2021 and the later part of 2020 were, generally speaking, something of a lending anomaly due to the sheer volume of transactions taking place across all sectors.

MORTGAGE BORROWING AND APPROVALS

In terms of more recent figures, the latest Money and Credit report from the Bank of England showed that there were 70,700 mortgage approvals in March – down from just under 71,000 in February. However, this was higher than the average 12-month pre-pandemic level of 66,700 in February 2020.

In addition, mortgage borrowing reached £7bn in March, up from £4.6bn in February. This was the highest monthly level since the final month of stamp duty relief last September, when borrowing hit £9.3bn. Approvals for remortgaging rose slightly to 48,800 in March.

This remained below the 12-month pre-pandemic average up to February 2020 of 49,500, but was the highest since February 2020.

These figures reflect rising levels of inflation, interest rate increases, and the beginning of escalating living costs. Inevitably, these factors www.mortgageintroducer.com

continue to affect the lending landscape, although homeownership aspirations and the volume of purchase business remain strong.

INTERMEDIARY CASELOADS AND CONFIDENCE

These sustained activity levels were highlighted in the latest research from the Intermediary Mortgage Lenders Association, which found that the average number of mortgages placed per year by intermediaries fell only slightly in Q1 2022.

At the end of 2021, the average was 103 – a record high – and in the first quarter of 2022 that fell slightly to 97, matching the rates for Q3 2021. Despite a slight reduction in the average number of cases, the confidence of intermediaries in the business outlook for their own firms remained high. 62 per cent of intermediaries said they were “very confident” about the outlook for their firms, maintaining the same rates of confidence reported at the end of Q4 2021. Ninety-eight per cent of intermediaries were confident overall, with only a very small minority (two per cent) describing themselves as “not very confident”.

The average number of decisions in principle processed by intermediaries in Q1 rose by two when compared to the final quarter of 2021.

Despite a drop in January (to 28 per intermediary), the following two months saw a strong rebound with February reaching 32 per intermediary and March hitting 37, a two-year high. This rise came alongside homeowners returning to the market, aiming to remortgage or secure new fixed-rate mortgages.

The data does outline a slight lull, but this was fully expected – and it’s encouraging to see advisers maintaining their momentum, with solid underlying demand continuing to underpin the mortgage market.

WELLBEING AND MENTAL HEALTH

Whilst the high and lows of the mortgage market are well documented, the impact of the pandemic, a hectic housing market, and ever-changing client demands continue to weigh heavily on the wellbeing and mental health of intermediaries and people operating across the industry. This is a topic that we tackled last year in a very well-received instalment of the Mortgage Insider podcast. The episode saw the Mortgage Mum, Sarah Tucker, share her experience alongside chartered psychologists Nana-Efua Lawson and Kate Oliver, who discussed the changes they’d seen in organisations and the coping strategies we could all use to build resilience. This episode is still available to listen to.

I’m referring to this after seeing a report released by the Mortgage Industry Mental Health Charter (MIMHC) that showed that while almost half of brokers are seeing improved mental health support at work (48 per cent), 23 per cent say their mental health is either “poor” or “of concern.” The report added that over half (55 per cent) are working more than the recommended weekly guidance, with 13 per cent saying they work 60 or more hours a week and a quarter never getting the recommended amount of sleep in any given week. Overall, brokers were said to be moderately happy in terms of their professional contentment. However, those who are disillusioned and considering their options had risen to 14 per cent (previously 10 per cent).

Everyone has their own unique set of circumstances to deal with, and this report really does underline the importance of individual and collective support in meeting the MIMHC objectives of improving and implementing best-practice mental health provision in the finance sector. Let’s hope that by focusing on and talking openly about this subject, we can all continue to take steps in the right direction. M I JUNE 2022 MORTGAGE INTRODUCER

5

REVIEW

6

MORTGAGE INTRODUCER JUNE 2021

www.mortgageintroducer.com

REVIEW

MARKET

The material squeeze on lenders’ margin for error Steve Goodall Managing director, e.surv

A

s I write this, the Financial Times is reporting that lenders are pulling products at very short notice and struggling to deal with a tsunami of applications, thereby imperilling fragile chains and increasing borrowers’ costs through delays. The average shelf life of a mortgage, according to Moneyfacts, is about 21 days.

Leaving aside the not inconsiderable operational impact of assessing these applications, I am reminded of the NINJA mortgage rush – no income, no job, no assets – between 2005 and 2007. It seems surreal that the market allowed things to get so out of control.

There is a timely lesson to remember.

Borrowers must be able to afford to repay, but the other side of that coin is the security. I wonder if our focus on the borrower and affordability will again come at the cost of really understanding the security. Each is just as important as the other.

Just when we assume we know everything about a property market, something reminds us that we should have taken more time to care.

For example, cladding, fire safety standards, and carbon footprint are today having a material impact on value. A simple “Is it there?” check is not going to cut it. Technology can help, but only when the right data pools exist, and often we do not know what those are until the problem presents. Today’s AVMs are highly sophisticated tools that can process huge amounts of data – not just comparables in the area or proximity to schools, stations, and green space, but also an analysis of broader valuation www.mortgageintroducer.com

trends to identify anomalies. But they do not come with insurance-backed guarantees, because they have to work on retrospective data. If that is all very positive, then so is the output. It would be remiss to assume that they can entirely replace the judgement of a surveyor when historic data is patchy, unreliable, or even incorrect.

Condition matters when assessing value, including those elements of a building that deliver energy performance. When you consider impairment risk, the market condition today of an EPC D-rated property will materially affect perceptions of its future value. It’s already happening.

“The asset matters and will increasingly do much of the heavy lifting for mortgage borrowers. In the current economic environment this becomes even more important for lenders” From our own Property Watch research involving our employed surveyors, we know electric vehicle charging points, rightly or wrongly, are perceived to add value to properties.

Should they? And how do we know they are legitimate if we cannot see them (especially on Google)? Kicking the tyres matters.

The asset matters and will increasingly do much of the heavy lifting for mortgage borrowers. In the current economic environment this becomes even more important for lenders. We are all too aware of the cost-of-living crisis and soaring inflation (seven per cent and rising), and wages just aren’t keeping up for most workers in the UK. At the same time, property prices just keep going up. The Office for National Statistics

figures show average house prices rose 10.9 per cent in February over the preceding 12 months.

Consequently, those hoping to get onto the property ladder any time soon will be faced with tighter and tighter affordability criteria in the midst of lower disposable income, salaries being eroded by inflation, and deposit savings sitting in cash accounts paying a whisker over one per cent if you’re lucky. We are already seeing the effect this is having on lending patterns.

The Bank of England’s latest data set shows the share of mortgages advanced in Q4 2021 with loan-to-value ratios exceeding 90 per cent was 4.2 per cent – three percentage points – higher than a year earlier, and the highest observed since Q2 2020.

Within this, the share of mortgages advanced with LTVs over 95 per cent was 0.2 per cent, 0.1 percentage points down from the previous quarter. Meanwhile, the proportion of lending to borrowers with a high loan-to-income ratio increased by 1.7 percentage point on the quarter to 50.2 per cent in Q4 2021, little changed from a year earlier.

Borrowers with a single income and an LTI ratio of four or above accounted for 11.8 per cent of gross mortgage lending in Q4 2021 – a 0.5 percentage-point increase compared to the previous quarter. Borrowers with a joint income and an LTI of three or above accounted for 38.4 per cent of gross mortgage lending in Q4 2021, a 1.2 percentage-point increase compared to the previous quarter.

These numbers point to a material squeeze on margin for error – it is lenders that are being forced to soak up this added risk. Some can be passed back to the borrower through higher rates, but given the way the economy looks likely to go, ensuring asset risk is clearly understood is only going to get more valuable for lenders. M I JUNE 2022 MORTGAGE INTRODUCER

7

REVIEW

LONDON

Renaissance London Robin Johnson Managing director, Kinleigh Folkard & Hayward

S

omeone once said that the streets of London are paved with gold. It might have been true for Dick Whittington, and plenty have followed him since, but during the past two years it felt rather as though our big cities had fallen out of favour – at least in the general commentary about house price rises.

Fair enough – the race to the country in search of homes with the space to accommodate home-working and gardens to make lockdown living more bearable was real. It was followed, too, by the so-called Great Resignation when companies began to demand that their employees start coming back to the office.

But even these trends didn’t really dent London’s housing market, and there is a lot of evidence now of its renaissance – even in the face of rising interest rates. Things feel very much on the turn. Walk down a London street and you’d be forgiven for thinking “COVID? What COVID?” The city is even more enlivened than it was before the pandemic, and a new generation of 20-somethings is raring to go.

Losing two years of opportunity to live, laugh, love, and generally have a ball in the country’s vibrant capital has left people hungry for its vital life.

It’s showing in the sales data. Office for National Statistics data shows average annual house price growth in London was at 8.1 per cent in February.

There is an ongoing and well-reported shortage of stock on the market, and anecdotal tales of desperate pleas from buyers at their wits’ end trying to find somewhere bigger to live are abundant.

Rents in the city are also rising rapidly. More recent data from research house LonRes show that both sale prices and rents are still rising. Achieved prices across the whole of prime London were

8

MORTGAGE INTRODUCER JUNE 2022

five per cent higher in April 2022 than during the same month last year, while rents were a massive 28.3 per cent higher over the same period.

The astonishing rise in rents is partly thanks to the lack of stock available to rent, which is down 58.6 per cent over the year. The lack of stock is also restricting activity, says LonRes, with new lets down 59.9 per cent compared to last year. New instructions for properties to let across prime London are also 37 per cent lower than last year and 50 per cent lower than the pre-pandemic average between 2015 and 2019.

This raises some questions. The latest round of regulations to hit landlords includes fire safety standards and significant investment to improve rental properties’ energy efficiency.

Consequently, there are landlords who have thrown in the towel and exited the market. It’s possible this explains the shortage of new listings, but we are of the view that this has presented attractive investment opportunities for portfolio landlords – especially in the wake of inflation hitting seven per cent in February and forecast to reach 10 per cent by the autumn.

Those looking for a real return on their money have few options at the moment. Cash is negative, and stock markets have been incredibly volatile since the start of the year. A recent crash in higher-risk assets – notably

cryptocurrencies – indicates that market sentiment is retreating toward safe havens.

Property is one such, and, given that its price inflation is currently proving a good hedge against consumer price inflation, appetite to buy is currently strong in the capital.

We are seeing a rise in the price buyers are willing to pay for flats, often in spite of a lack of outside space.

Indeed, LonRes data shows the average price of a flat across the whole of prime London rose 4.5 per cent over the past 12 months. Perhaps not the heady heights of Welsh house price appreciation, which is tipping 15 per cent, but in the capital 4.5 per cent is not to be sniffed at. Greater London too is now outperforming, as hybrid working is luring people back to familiar commuter destinations.

It would be remiss of me not to acknowledge that there have been a number of recent suggestions that house prices are set for a crash. The cost-ofliving crisis, lenders rolling back loanto-values, four hikes in the base rate in six months, and a general reluctance to over-indebt oneself have all been raised as factors that will curb demand and ultimately put a drag on price inflation.

These factors are real enough that we need to watch the market closely, but the British housing market has a habit of performing completely out of line with the rest of the national and international economy. Supply and demand dictate this market – geopolitical shocks notwithstanding. M I

www.mortgageintroducer.com

Lifetime Mortgage Specialists LTVs of up to 57.5% on our lifetime mortgages, helping customers to access the funds they need for brighter retirement planning • Flexible repayment options ERC-free across all our products • Award-winning service from Dementia Friends trained staff to support your customer needs

We’re here to ensure your customers will never be left in the dark

www.pureretirement.co.uk Company registered in England and Wales No. 7240896. Pure Retirement Limited is authorised and regulated by the Financial Conduct Authority. FCA registered number 582621.

REVIEW

NETWORKS

Your clients need you!

Shaun Almond Managing director, HLPartnership

D

o you know how many of your hard-won clients have fixed-rate mortgages that are going to end this year?

Did you know that a record 1.5 million fixed-rate mortgage deals are due to expire in 2022, according to UK Finance, with the number of product transfers having grown from £157bn in 2018 and predicted to reach £276bn next year?

There is therefore every probability that included in that number might be some, or many, of your clients.

Unless you have been living in a parallel universe where rates only ever go down, you will have seen the ominous evidence that mortgages are becoming more expensive, and while those of us with fixed rates can feel relieved, the simple truth is that, as inflation rises, everyone with a mortgage will eventually be affected if we enter a period of high rates.

To add to the gloom, the Bank of England increased its base rate to one per cent on 5 May and, according to no less a figure than the Chancellor of the Exchequer, the base rate could rise to 2.5 per cent by the end of the year – so, many more of your clients, especially those on variable or tracker rates, are going to need your help.

The immediate good news is that if a high proportion of your mortgage clients are on a fixed rate, monthly repayments will be unaffected for as long as those fixed terms last. So, along with the other roughly 74 per cent of mortgage holders who are on fixed-rate deals, your foresight in explaining the advantages of fixing their repayments will now prove their value. However, as those clients whose fixed rates come to an end this year will find out, going back to their lender’s variable rate is likely to produce considerable payment

10

MORTGAGE INTRODUCER JUNE 2022

shock if the Chancellor’s prediction is realised.

With the continuing uncertainties in the financial markets and the wider international economy, further rate increases cannot be ruled out. Against this background, your role as a mortgage professional is going to be tested, because the need to set up a proper mortgage triage station to help clients is going to be vitally important for a number of reasons.

At HLPartnership, we encourage our network membership to take a proactive stance of regular contact with their client base by providing specific tools to help them as a matter of course. However, many brokers still prioritise new business from new contacts at the expense of existing ones. Of course, it’s important to spend time canvassing for new clients, but it’s a mistake to ignore your client bank because, unless they are being regularly serviced, they will leave you.

Now more than ever, when a customer’s fixed rate is due to finish, you can be sure that their existing lender will have been in touch to offer a new fixed deal or SVR. Why would you let anyone else get in there before you and steal your client away? And they won’t be the only ones. Relying on a customer to return to you runs the risk of making a

big presumption, to say the least! There are other lenders and brokers like you who will be only too happy to take them from you.

While no one wants rate rises, this is as good a reason as any to be in touch with customers and offer to review their mortgage situation. Even if there is nothing you can do, you will have reignited the relationship and therefore the opportunity to talk about protection and other needs.

At the risk of getting a reputation for sounding like a broken record, please do take note that the data in your client bank is the most valuable asset you possess. Taking the analogy further, if you considered it to be valuable, wouldn’t you do everything you could to make sure it was secure? After all, you wouldn’t just leave a Rolex watch in the street, would you? Of course not.

So, pay your existing clients some attention. This rise in the base rate and the knock-on effect on lender rates is a heaven-sent opportunity to engage or re-engage. Don’t waste the chance.

There is an old saying: “Use it or lose it.” If you agree that your client bank is your biggest asset, don’t let anyone take it away from you. If you don’t value it, this industry will hold the door open while you leave. M I www.mortgageintroducer.com

REVIEW

EDI

How education can support EDI in the mortgage industry Gordon Reid Business and development manager, London Institute of Banking & Finance

I

n October 2021, the Association of Mortgage Intermediaries (AMI) published a report on equity, diversity, and inclusion (EDI) in the industry – and you might describe the findings as a bit of a wake-up call.

Only 43 per cent of AMI members surveyed believe that the mortgage industry attracts a workforce that truly represents the whole UK community.

The report highlighted industry concerns about opportunities for career progression and rewards, as well as about inappropriate and discriminatory behaviours. On a more positive note, it also found that the vast majority of people now understand the importance of improving EDI in the mortgage sector. The greater challenge is understanding how to do that.

WHY IMPROVING EDI MATTERS

To reflect the market it serves, the mortgage industry must attract, retain, and develop people from a full range of cultural, gender, age, and ethnic backgrounds – and must encompass different demographic profiles.

Without this diversity of background and experience among advisers and others, it’s doubtful whether firms can fully understand the needs of the whole range of customers they serve.

Interestingly, according to research

by McKinsey, the most diverse companies are 35 per cent more likely to outperform the least diverse. EDI has also been shown to enable greater www.mortgageintroducer.com

creativity and innovation, create improved public perception of the industry, and improve staff retention.

And as the AMI report shows, perhaps the key to this last point is ensuring that the behaviours of everyone in the industry are appropriate.

WHY EDUCATION IS KEY

When a sustained change of behaviour is required, education is usually the key to achieving it. This is primarily because learning plays a huge role in establishing the culture of an organisation, including by contributing significantly to the understanding of behavioural standards.

In addition, because many unfair practices or inappropriate behaviours are born out of a lack of understanding, learning is often the most effective way to address these.

To have a positive impact on EDI, learning programmes do not necessarily need to focus directly on these issues. However, when designing and delivering learning, it’s essential that there be no unconscious biases at play. So, when reviewing your learning programmes, ask yourself a few questions to check for unconscious bias.

PROGRAMME ACCESSIBILITY

You should think very carefully about how and when any programme is delivered. If it includes sessions at a fixed time, do they take into account the needs of those with caring responsibilities, such as parents?

Flexible, modular, on-demand learning is likely to be accessible, and more appealing, to a wider range of learners. But if it’s online, does it work for those using assistive technologies to access digital content?

Will the programme appeal more to some demographic groups than others?

Is the language used to promote the learning clear about the benefits to everyone? Have you included enough detail? Check and check again for any unconscious biases.

Is the programme content appropriate? Is there anything about the content that means some groups will be less likely to engage with it?

Will everyone feel comfortable enough to participate fully?

A FOCUS ON BUSINESS PRACTICES

Education also has a major role to play in many of the other functions of a company. For example, how do you ensure that your recruitment policies and procedures are fair? Do they attract people from all backgrounds, with the appropriate range of skills, knowledge, and experience?

Have you looked closely at how you recognise and reward staff? Is this done equitably and in ways that meet the cultural expectations of current and prospective employees and customers?

Do career pathways provide the right opportunities for everyone based on competence and capability, above all other considerations?

How are employees educated on the treatment of vulnerable customers?

Effective learning programmes play a critical role in ensuring that all staff recognise vulnerable customers and know how to support them.

WHAT THE REGULATOR SAYS

In July 2021, the Financial Conduct Authority (FCA) and Prudential Regulation Authority issued a joint discussion paper on accelerating the pace of meaningful change in diversity and inclusion in the financial services sector.

The FCA said it was “critical” to “our work on culture and governance” and that EDI was “based in existing work around the treatment of consumers and the proposed new “Consumer Duty”, due to come into force later this year.

The FCA also highlighted the benefits of a diverse and inclusive workplace to organisational risk management.

Regulations aside, there are lots of good business reasons for improving EDI. Perhaps now is a good time to really focus on how your organisation is doing. M I JUNE 2022 MORTGAGE INTRODUCER

11

FEATURE

MT FINANCE

Bridging rates fall to new lows as volumes rise Raphael Benggio Head of regulated underwriting, MT Finance

T

he latest Bridging Trends figures were released last month, and I was pleased to see the figures were positive, as gross lending volumes increased and average interest rates dropped.

Despite the challenging past couple of years, the bridging finance sector is certainly showing sustained growth, with the12 Bridging Trends contributors revealing they transacted £156.78mn in bridging loans in Q1 2022, an 8.5 per cent increase on the £144.51mn transacted in the same quarter in 2021.

This increase was predominantly driven by borrowers turning to bridging finance to help unlock property transactions.

Though the report revealed that for the fourth consecutive quarter the most popular use of a bridging loan was to purchase an investment property, it was funding a “chain-break” that accounted for the greatest increase in demand in Q1, jumping to 23 per cent of all lending, from 18 per cent in Q4 2021.

As demand continues to outstrip supply in the residential property sector, there is increasing pressure on buyers to complete purchases efficiently to avoid chains collapsing.

This is the point at which many consumers turn to bridging finance, as it alleviates this pressure, allowing them to get property purchases moving and meet deadlines as quickly as possible.

regulated bridging transactions in Q1, jumping to 43.9 per cent from 36 per cent in Q4 2021.

A regulated bridging loan not only enables borrowers to meet deadlines, but it also allows them to compete with cash buyers – a position many are keen to be in while stock remains so sought after.

Demand for regulated products was reflected in data provided by mortgage criteria database Knowledge Bank. It reported the top criteria search made by bridging finance brokers on its system in Q1 2022 was “regulated bridging.”

LOWER INTEREST AND LTV

The increase in regulated bridging loans directly affected both the average loan-to-value (LTV) level and average interest rate in the first quarter, with the average monthly

interest rate falling to a historic low of 0.71 per cent. This is considerably cheaper than the 0.77 per cent reported in Q4 2021 and the 0.74 per cent in Q1 2021.

The average LTV in Q1 dropped to 54.5 per cent from the 57.3 per cent reported in Q4 2021. This was fuelled by the increase in regulated bridging, as these transactions often see unencumbered properties being used to facilitate onward purchases.

Considering the current economic backdrop, will we see the same confidence from borrowers in the next quarter? I certainly hope so, and I Iook forward to seeing what trends emerge in Q2.

Bridging Trends is produced by MT Finance and combines bridging loan completion figures from some of the UK’s leading specialist finance brokers: Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness, Impact Specialist Finance, LDNFinance, Optimum Commercial Finance, Sirius Group, and UK Property Finance. The data for top broker criteria searches is supplied by Knowledge Bank. M I

REGULATED BRIDGING DRIVES MARKET

Considering how competitive the UK housing market has been, it was no surprise that there was a rise in

12

MORTGAGE INTRODUCER JUNE 2022

www.mortgageintroducer.com

Q1 2022 Take a look at the latest infographic to discover the general trends that shaped the UK bridging finance market during Q1 2022.

Average Charge

Average Monthly Interest Rate

Average Completion

0.71%

53 DAYS

88.1% 11.9% 1st charge *Q4 2021 = 83%

*Q4 2021 = 56 days

*Q4 2021 = 0.77%

2nd charge *Q4 2021 = 17%

Total Gross Lending

£156.8m *Q4 2021 = £145.42m

Transactions

Average LTV

Average Term

56.1% 43.9%

54.5%

MONTHS

12

*Q4 2021 =57.3%

Unregulated *Q4 2021 = 64% Regulated *Q4 2021 = 36%

*Q4 2021 = 12months

Bridging Loan Purposes Auction Purchase

2%

Chain Break

Business Purchase

Investment Purchase

Re-bridge Finance

10% 23% 26%

*Q4 2021 = 4%

*Q4 2021 = 15%

*Q4 2021 = 18%

6%

*Q4 2021 = 29%

*Q4 2021 = 6%

Refurbishment (Heavy)

Regulated Refinance

Unregulated Refinance

Other Finance

12%

5%

9%

7%

*Q4 2021 = 15%

*Q4 2021 = 6%

*Q4 2021 = 5%

*Q4 2021 = 2%

For the fourth consecutive quarter, purchasing an investment property was the most popular use for bridging finance. Whilst loans for chain break purposes saw the greatest increase in demand.

Top Criteria Searches 1

Regulated Bridging

2

Minimum Loan Amount

3

PROVIDED BY

#BRIDGINGTRENDS Brought to you by

Contributors

Maximum LTV / Loan To Value

REVIEW

RECRUITMENT

It’s time to talk about money Pete Gwilliam Owner, Virtus Search

A

healthy employer-employee relationship should have transparent pay grade structures, and both parties should regularly consider the value of the employee relative to others in the same salary banding. Trust that this is being done equitably and inclusively is implied, and the process should focus on what you are being asked to deliver in the future and the value you create.

The Equality Act 2010 states that men and women who perform the same work for the same employer must receive equal pay, unless any difference can be rationalised by performance and delivery of key accountabilities.

What you may not know is that the same law requires all employers with 250 or more workers to publish their gender pay gap figures each year. These can all be searched and compared using the government’s official gender pay gap service (https:// gender-pay-gap.service.gov.uk).

My generation was brought up to believe talking about money was a taboo subject, but inclusivity demands transparency – and especially for women and other under-represented groups, the knowledge that they are being treated equitably surely starts with knowing how an employer ensures all are being paid fairly.

The inherent problem here, however, is that employment contracts often require that salaries be kept confidential, thus enabling a continuing disparity in wages, since a culture that prohibits people from discussing earnings is likely to be less

14

MORTGAGE INTRODUCER JUNE 2022

accountable. Further compounding this tricky area is the fact that, despite such common contract requirements, it is unlawful (under the Equality Act 2010) to prevent an employee from disclosing a difference in salary if the purpose of doing so is to try to discern whether an equal-pay issue exists.

Of course, if conversation is stifled on this subject, it becomes harder to identify where problems exist and to encourage healthy debate about any discrepancies within an organisation.

This raises the suspicion that it is in the interests only of employers and those paid more than anyone else in their grade to continue to make salaries a confidential matter.

Not being able to talk about money removes a sense of control and allows cynicism to creep in regarding other vital matters of institutional inclusivity that may also be opaque. For example, who and why does someone gets promoted or given a special project?

One survey on last year’s Equal Pay Day found only one in four workers feels strongly that their employer is transparent about pay, despite 70 per cent of those surveyed believing that pay transparency is vital to employee satisfaction.

Because employees have a legal right to discuss salaries, you should feel empowered to speak up if you notice that something is wrong, especially when it comes to issues such as bias and discrimination. I fully appreciate that the deep-seated stigma around money means talking about it is usually more easily said than done; here are a few thoughts on how to approach this.

1. Your initial discussion with your manager should focus on offering objective information. For example, you can use gender pay gap data or quote details about similar types

of roles at other organisations and their salary benchmarks (none of which is in breach of a contract that prohibits internal discussions of sensitive information), asking why your salary appears to be lagging behind.

2. Ask what might be missing in your experience or achievements and value creation that prevents your salary being reviewed.

3. Detail progression since your last formal review and talk about your plan to deliver in those areas that are important to the firm.

4. Help your employer realise that this is you being serious about your future and wanting assurance that there is a pathway to advancing financially and in a workforce that is equitably treated.

5. At all times you need to prevent your boss from feeling you are a disruptive team member who is leading discussions and gossip about reward.

The more logical your argument, the more businesslike the discussion – and such an approach has a greater professional depth to it than making the discussion only about how hard you’ve worked in the past year, or your changing personal situation (new mortgage, kids, etc).

But ultimately, you can’t allow vague promises to suffice. You should agree on a good time to revisit the issue (get a date in the diary for any follow-up), and on what specific, measurable results will be required before a pay review will be confirmed. If there are promises of any future incentives/pay agreements, get these summarised in an email, and ask for them to be recorded in your personnel file – increasing the probability that your employer will commit to following through.

If you believe you’ve made a logical, compelling case for a pay review and/or being considered for promotion, and you are not given any commitment to recognise your value now or in the future, then this should tell you everything you need to know about your next step. M I www.mortgageintroducer.com

REVIEW

RECRUITMENT

Glass ceilings Lee Johnson Director, Willow Private Finance

S

ince the beginning of 2022 I’ve been heading up a recruitment drive in a sector whose success or failure, like that of many directly authorised firms in the UK, depends entirely on its ability to attract and retain talent.

In this particular case, that talent is new mortgage brokers.

One thing that’s unique to recruitment, and that is often overlooked, is that you get to have an honest, unvarnished appraisal of the working conditions of an external brokerage. This warts-and-all discussion transcends marketing and messaging and is far superior to any other research you may wish to conduct about the market in which we trade.

Each time we came to a certain point in the interview, the broker would take a deep breath, look to the sky, and sigh. This was often followed by a tale lamenting some intolerable sacrifice made in previous weeks and

www.mortgageintroducer.com

months regarding the broker’s family, or telling of the death knell to their financial aspirations as the realisation of the scale of the problem dawned on them.

Irrespective of the firm, its size, its lifespan, or its target market, there was one consistent complaint across the industry that left me scratching my head. The issue, if you hadn’t guessed it already, is the ever-present balancing act between business development activities and administration of new cases.

It has occurred to me that the leadership of these brokers’ firms is not approaching this as a problem to be solved but instead as a dichotomy that will have to be managed.

Forever.

What a bleak, debilitating, and pessimistic approach to the business of being a mortgage broker.

Most brokers join a brokerage firm because they genuinely find the experience of providing financial solutions through advice and problem-solving rewarding.

Building relationships and closing deals are the key tenets of a successful broker.

Sadly, with the fruits of a broker’s success comes a glass ceiling. The

administration associated with the business limits a broker’s earning capacity, unless things like sleep or personal relationships are sacrificed to a level that’s unsustainable.

As a director of a firm with a number of brokers, I understand the temptation to insist that they be responsible for the whole client journey, including the administrative tasks. From a profit-and-loss perspective, retaining adequate numbers of experienced administrative staff to facilitate the freedoms the advisers desire is expensive, reduces profit margins, and carries substantial risk as payroll liabilities rise.

It’s certainly unattractive if you believe the top-line results and culture won’t be the better for it.

However, in my experience, freeing up our brokers to focus on what they love doing whilst employing experienced administrators who love doing admin has created a culture of continued growth for both the firm and everyone involved.

Brokers are free to focus on what they find most fulfilling in their roles. They create ideas and strategies to do more of what they enjoy professionally. They have the freedom to explore channels for increasing their desk that would not otherwise have been available because they would not have been allowed the creative capacity to consider it.

The net effect is that everyone wins. They are happier because they earn more and learn more within a work-life balance that ensures that external responsibilities are not usurped.

The P&L wins because the gap created by removing administrative demands is filled with business development and, eventually, more cases.

The business wins as everyone moves forward together in a culture of creativity and productivity.

While I am sure that there are some out there who may view this sort of thing as a gamble they’re not willing to take, I, for one, will be continuing to place this bet on our team. M I JUNE 2022 MORTGAGE INTRODUCER

15

REVIEW

TECHNOLOGY

What lenders do next will be key Steve Carruthers Head of business development, Iress

T

his year marks Iress’ Mortgage Efficiency Survey’s 11th outing. Interview invitations have been sent out, and I’m pleased to say that we’ve already had a really good reaction from lenders willing to take part in this annual research.

These reports have lasting value for our own business, but also because they provide insight into the temperature of the market overall.

Each business faces its own challenges, particularly when it comes to how efficient their processes are.

Last year’s report found, perhaps unsurprisingly, that lenders had spent 2020 and early 2021 investing heavily in measures to improve their processes. Lockdowns and remote working precipitated by the onset of the pandemic forced all businesses to review their models, driving them to adapt to a more flexible and accessible working approach. Lenders told us almost across the board that they had spent the past year focused on “system modernisation, process efficiency and digitisation”. At the time, we found huge gaps among lenders’ processing times, with significant variation in application-to-offer timescales – ranging from 14 to 32 days. Reliance on brokers also saw an uptick, from 77 per cent to nine out of 10 mortgage applications coming via the intermediary channel. Given the complexity of the mortgage market, the vast swell in demand on the heels of the stamp duty holiday, and bestbuy mortgage rates barely over one per cent, the value of mortgage advice for

16

MORTGAGE INTRODUCER JUNE 2022

borrowers went through the roof.

This context is important to keep in mind when collating this year’s survey. We’ve seen the base rate hiked four times since December, with it now sitting at one per cent. Mortgage rates are rising too, but so far, despite climbing borrowing costs, demand remains robust. Property prices are not only holding up, they are still rising at a rate in the double digits. Office for National Statistics figures recorded an annual rise of 10.9 per cent in February.

The need for agility and efficiency is constant for any business, and after 12 months of focus on improving both, lenders are now seemingly eager to talk about the future. Already, just a few days into the interviewing stage, we’re hearing considerable positivity about the year ahead.

Having just emerged from the latest reporting season for banks and building societies, it’s no wonder.

2021 was a record year for gross mortgage lending, with lenders advancing £315.9bn in 12 months, Bank of England figures show.

Lender balance sheets reflect that, with the vast majority looking very healthy. This bounce in confidence is enduring, and the lenders we’ve spoken to are already positive that this year is one in which to focus on future-proofing their businesses.

What that looks like for each lender is different, but there are some key themes emerging.

While environmental, social, and governance are all priorities for lenders, the green agenda is the big one. Regulation designed to drive lenders to cut their own carbon emissions and support borrowers in improving their homes’ energy efficiency is now coming in at pace.

EPC band rating minimums are now looking very real indeed for owner-occupiers and landlords.

In April, the government confirmed it is bringing various deadlines forward. Lenders are acutely conscious of this, with new products and green mortgages increasingly a focus across the market. The Bank of England has been very clear about its expectations of lenders’ role in helping to cut carbon emissions produced by the UK’s housing stock. Further product innovation and, inevitably, the process changes required to facilitate that are firmly in the minds of lenders for this year.

The Minimum Energy Performance of Buildings Bill, currently in its second reading in the House of Commons, proposes to make it mandatory for all homes – including owner-occupier – to have a minimum EPC band rating of C or above by 2035. While 12 years may sound like a long way off, it’s clear that homeowners need to be thinking

“Further product innovation and, inevitably, the process changes required to facilitate that are firmly in the minds of lenders for this year” now about how they’re going to pay for gas central heating to be replaced by electric heat pumps, double- or triple-glazed windows, and insulation of cavity walls and roofs. Given that the ill-fated Green Homes Grant hasn’t been replaced, the onus is firmly on lenders to find a way to support borrowers in paying for these changes. That’s something that will have to happen fast, as the Bill also stipulates that by 31 December 2030 all mortgage lenders must ensure the average energy performance level of their domestic portfolios is in at least EPC band C. This year’s Mortgage Efficiency Survey will achieve two important things in understanding the last year’s performance and also casting a light on how lenders are adjusting to this future, and where they can take advantage of opportunities as they emerge. M I www.mortgageintroducer.com

REVIEW

TECHNOLOGY

The right time and place – the BSA 2022 Jerry Mulle Managing director, Ohpen

T

his year’s annual Building Societies Association conference was held in Liverpool at the start of May. After last year’s virtual event, I must say it was most welcome to have the opportunity to meet friends and colleagues face-to-face again. For me this was particularly important, given that this year’s was my first BSA conference with my Ohpen hat on.

For those new to our service, it appears now is the ideal time to offer lenders an affordable way into our cloud-native platform – think interoperable, scalable, robust, well-supported solutions for every stage, from origination to servicing.

Given my role in the mortgage and savings markets, I was fascinated by the insights offered by those speaking during the two-day event and by the questions that the focused discussions elicited. Several themes emerged as the conference wore on, but a few really stick in my mind.

The green agenda was covered in detail, with the Bank of England’s Sarah Breeden raising some interesting views not only on how financial services firms support their own paths to net zero but, more importantly, how they support their customers and clients in their efforts to cut carbon emissions.

Another key theme was cybersecurity – the threat of being hit by malware or ransomware or losing confidential customer data to the dark web gets more and more worrying each day. Lenders are a prime target for fraudsters looking to make an easy www.mortgageintroducer.com

buck by exploiting companies’ weak spots, often wreaking havoc on their customers while they’re at it.

The pace of digitisation, spurred by the pandemic and the rush to remote working, was a third point of discussion that popped up several times throughout the conference.

Accessibility, security, and efficiency have posed multiple challenges to lenders wanting to support flexible working safely.

All three are inextricably intertwined, as conversations between delegates and speakers revealed. What seemed most important to building societies present at the conference was how to embrace change while still serving members to the standards they demand and deserve.

During his keynote speech, Robin Fieth, chief executive of the BSA, picked up on Sarah Breedon’s comments, agreeing that the onus is “on us all to seek to navigate this route [to net zero] such that we do encourage householders and landlords to invest in clean energy and greater energy efficiency”.

Critically, he also said: “We must do all we can to avoid creating swathes of new mortgage prisoners, trapped in energy-inefficient homes that are falling in value.”

His comments will resonate with anyone running a lender today.

“In our mutual world of savings and mortgages, one [thing] stands out for me in particular,” Robin said. “Do we green our own balance sheets by restricting new lending to homes and properties that achieve the magic, if flawed, EPC A-to-C rating?

“Or do we invest in the UK’s overall just transition to net zero by working with households to reduce their carbon emissions? Do we in fact put the greatest emphasis on and direct the greatest effort to

supporting those living in the oldest and energy-leakiest properties?”

His questions are provoking. It’s one thing to switch all your light bulbs to LED, quite another to come up with a mortgage that helps borrowers to do the same. My own view is that it doesn’t need to be either/or.

Moving from server-based systems to the cloud can cut a lender’s carbon footprint by 88 per cent. That same strategic decision also gives lenders the ability to design and deliver green products quickly and securely, not least because cloud-based software as a service makes the smart use of data not just possible, but easy.

Several speakers voiced the question on the minds of most mutuals’ boards: How do we become more technology-driven without spending a fortune on systems that don’t achieve our strategic objectives?

It’s a big question, and there are several ways to consider it.

The pandemic exposed just how insufficient most companies’ security was outside of their physical office buildings – personal broadband connections used to connect to central systems with access to highly sensitive personal data are a catastrophe waiting to happen.

So, too, are the chinks in a company’s cyber armour that cannot be patched, even with new technology. All mutuals will know the headache caused by multiple systems, many of which are decades old and all of which store data in their own quirky formats. The fear that porting data from these legacy systems onto newer platforms that are fit for purpose in today’s market is serious, but too often debilitating.

There’s a temptation to think that when things aren’t broken, it’s best not to fix them. In the case of adopting true digitisation of banking processes, managing both customers’ savings and their mortgages, the adage is flawed.

There are solutions (and we provide one) out there that offer a safe transition to faster, affordable, and more secure software; embracing them is a no-brainer. M I JUNE 2022 MORTGAGE INTRODUCER

17

REVIEW

TECHNOLOGY

Buy-to-let is a model for the future of residential lending Mark Blackwell COO, CoreLogic

I

n my role, we spend an inordinate amount of time looking forward.

But successful innovations need to consider the experiences of the past.

An empirical approach can reveal a lot.

Though the mortgage market has changed over the past 10 to 15 years, in some important ways some things remain from the 1980s – borrowers still ask lenders for some money to buy a house, and in return they’re charged interest and agree to forfeit the house if they can’t keep up with repayments.

How precisely that happens has evolved massively. The early ’90s saw the carnage caused by 1989’s economic crash, but when the pain finally passed, the boom from around 1999 on was heady. Self-certification and subprime, discount rates and packagers were coming out of our ears – in hindsight, we might recognise that the market was out of control.

Interestingly, technology played a quiet role in that pre-credit-crunch peak. The first automated valuation models were being used, largely by newer tech-driven non-bank lenders, and it proved a game changer.

Mortgage decisions in minutes. By anyone’s standards in 2007, that was just incredible.

The downside was lenders’ failure to match the clever use of data within AVMs with a similar degree of intelligence when it came to the other element of risk represented by a mortgage: the borrower. Many fingers were burned; suffice it to say that the global economy was left reeling.

Roll forward seven or eight years, though, and the mortgage market is unrecognisable. Technology has stopped

18

MORTGAGE INTRODUCER JUNE 2022

being seen as a magical money tree, solving all of our problems in a single click of a button. The tech bubble of the early 2000s, followed swiftly by the global financial crisis fiasco, put paid to this rather naïve blind acceptance.

But technology has developed at an exponential rate, and the speed at which innovations are coming to market has not let up. Risk, data richness, and machine learning are now fundamental to the successful employment of technology in all industries, but particularly for mortgages.

Some subsectors have embraced digitisation much faster than others when it comes to smoothing the path to homeownership. In the unregulated parts of the market, and for buy-to-let in particular, underwriting that uses automated assessments of multiple sources of data is becoming almost commonplace.

“Risk, data richness, and machine learning are now fundamental to the successful employment of technology [for] mortgages” The race forward in this part of the market has been fuelled by other factors, too. Conservative policy phasing out tax relief for buy-to-let landlords, combined with more comprehensive credit risk assessments imposed on lenders by the Prudential Regulation Authority, has radically reshaped the private rented sector.

Portfolio landlords owning a network of buy-to-let properties through a limited company are increasingly the norm. Unlike the case with accidental landlords, however, assessing the risk these far more complex borrowing prospects present can be genuinely overwhelming for underwriters trying to assess an application manually.

Data analysis facilitated by smart technology has become incredibly important – there are buy-to-let lenders out there capable of putting almost the entire application for purchase or remortgage into the hands of the borrower. That suits landlords, particularly those with large portfolios subject to a full underwrite under PRA rules. Time, effort, and money are saved by everyone.

We’ve discovered, following the launch of our own buy-to-let hub, that it’s not just front-end processing to which this tech can be applied.

Back-book risk is an increasingly important consideration for credit teams and compliance. Running the tech to understand the granular spread of risk sitting on a lender’s balance sheet doesn’t just provide insight into the strengths and weaknesses of their portfolios; it also provides hard evidence to inform future lending strategies and priorities.

For brokers and landlords, the experience is a breeze. DIPs can be delivered in minutes without the cavalier enthusiasm witnessed from 2006 to 2007. This is evidence-based decision-making. Over 20 lenders active in this market are using our service to originate and understand the risks on back books.

Providing the tools and data to understand a market that has undergone so much change in such a relatively short period of time gives me confidence that we will make significant progress in other markets. Our lending hub is doing that, and it will do more as more data is accessed through it.

The next challenge for the mortgage industry is how we accelerate the transfer of this experience and modelling of the portfolio buy-to-let market into the far more heavily regulated residential mortgage sector. It is a huge opportunity that the drive for better understanding of property energy performance will do much to quicken. We are ready. M I www.mortgageintroducer.com

TECH BUILT AROUND YOUR BUSINESS

Paymentshield’s Adviser Hub is designed to keep you in the picture when it comes to your GI business and helps you manage your clients. We recognise that home buying and remortgage journeys are taking longer to complete, so we’ve switched on some new functionality to make things easier. Now, if a pending policy expires you can get a new quote at the click of a button without the need to rekey any client information.

paymentshieldadvisers.co.uk/adviser-hub For intermediary use only. Paymentshield and the Shield logo are registered trademarks of Paymentshield Limited.

Authorised and regulated by the Financial Conduct Authority. © Paymentshield Limited 05/22 02326

REVIEW

TECHNOLOGY

The way we lend will change Tim Hague Director, Sagis

M

arkets never stay still, but there are some periods when change happens fast.

The past 20 years have been one of those periods and it’s the unlimited potential of the internet that’s done it. As technology has developed, it’s grown exponentially, sometimes leaving us reeling at the speed at which things now transform.

It can be tempting to fall into the trap of thinking all change is good. Investing in technology for the sake of it, however, is almost always inadvisable and can prove an extremely expensive error in judgement when one looks back.

That said, failing to move with the times and as the market develops is an equally bad idea. The challenge, then, is knowing what to change and what to keep the same.

Many lenders are currently in the middle of this quandary, and the importance of getting it right has been amplified by the pandemic, the economic standstill it triggered, and the vast amount of public spending to shore things up. And the inevitable painful burst of inflation we’re now witnessing will simply add further challenges.

Not only is the market moving, but customer profiles are also highly unpredictable because of the economic situation. As ever, uncertainty creates challenges, but it also provides opportunities. Necessity is the mother of all invention.

It’s an interesting time. Typically, economic downturn and recession breed conservativism (with a small c), an aversion to risk-taking, a ‘Save, don’t spend’ mentality. This time I wonder whether, contrary to the norm, the economic phase we’re going into will actually trigger some of the biggest innovations the market has seen in years.

20

MORTGAGE INTRODUCER JUNE 2022

We have more lenders than ever fighting to lend in an asset group that is more popular than ever, as inflation ensures others underperform. Borrowers may well need new solutions in terms of propositions to make lending affordable, but there are many signs this is underway.

This context brings me back to technology and how to invest in it wisely. It’s been a long time coming, but the way our economy is structured now bears very little relation to the design of mortgages – or pensions, for that matter.

Innovation on the product side has tinkered for a decade after the scalding that subprime and self-cert delivered.

Yes, we’ve seen a bit of flexibility come into the later-life sector, and buy-to-let affordability models have been forced to change by regulation clampdowns.

But really, the change in straightforward residential mortgages has been incremental. The most that can be said is that terms have climbed from 25 years to 40 in some cases.

A number of 10-year and even 30-year fixed rates have come to the market,

but short of a splash in the media on launch I’d question their impact on the wider market.

I suspect this is about to change radically, and, as ever, it will be driven by demand.

We’re already beginning to see some of the seeds of change, though I’d argue that tightening affordability assessments to account for future inflation is an oversimplistic patch on a problem that is going to become serious. This is lenders protecting their balance-sheet risk sensibly, but it’s not going to be a long-term play if getting money out the door is the objective.

There are big questions facing lenders today, not least of which is who they want their customers to be. Propositions need to be reviewed in light of the cost-of-living crisis and the shifts in global and local economies that affect individuals’ personal finances and working patterns.

This is what should be informing any decisions when it comes to investing in new technology to improve user experience, efficiency, and profitability.

The good news is that the services available today are entirely capable of supporting lenders facing such a wide range of possibilities for their customer base. The key is not to be prescriptive – adaptability, flexibility, and scalability are what’s important for lenders to win over the next decade. Cloud-based services are built for this purpose, allowing lenders to ebb and flow as economic shifts unfold.

The speed and ease with which lenders can pivot propositions in response to emerging market demand is going to separate the lenders that will thrive because of the uncertainty we face from those attempting to survive despite it.

We are not going back to ‘normal’ from here. We are going into a new unknown – we will have to work longer, pay more, suffer smaller disposable incomes, and somehow get through it.

Get through it we will, though; it’s up to lenders to decide how they make the transition. M I www.mortgageintroducer.com

REVIEW

TECHNOLOGY

The value of time, tech efficiencies, and choice Neal Jannels Managing director, One Mortgage System (OMS)

I

’m sure that many of us out there are constantly striving to maintain a better work-life balance. This is often easier said than done, especially when operating in such a fast and frantic industry as the mortgage market over the past couple of years.

Of course, we should remain thankful that, from a work perspective, this period has, generally speaking, treated us so well and that we have managed to remain busy and active pretty much throughout. Many other people in many other sectors were not so fortunate.

However, there is no need to feel guilty for feeling a little jaded at times – it has been a testing period – or for taking a small step back to delve a little deeper into what lessons we may have learned over the course of the pandemic.

For me, one of the biggest lessons has been the importance of time, efficiency, and choice. We all have different motivations in our working environment, and, as a business, we have found that the importance of these factors has been crucial to how

www.mortgageintroducer.com

we have continued to develop the OMS platform before, during, and post pandemic. Even before lockdown, there was growing interest from a range of companies who were looking to invest in a CRM system for the first time or were demanding more from their current provider. There were others who didn’t really understand the impact of such a solution. What we are now facing is a situation where a rising number of intermediary firms are looking to manage their customer data better, offer stronger sales support, deliver actionable insights, integrate with social media, and facilitate team communication. A good CRM system will also support lender integration, audit trails, AVMs, and credit searches to cut admin burdens across the board and help deliver greater efficiencies.

And why is this so important? Well, whilst we are seeing a slight slowdown in activity across some areas of the purchase market, time remains a hugely precious commodity for advisers, as workloads remain high following record levels of business at the end of 2021.

This was illustrated in the latest research from the Intermediary Mortgage Lenders Association, which found that the average number of mortgages placed per year by intermediaries diminished only slightly in Q1 2022

when compared to Q4 2021. At the end of 2021, the average was 103 – a record high – and in the first quarter of 2022 that fell slightly to 97, matching the rates for Q3 2021, which at the time was a record year.

Despite a slight reduction in the average number of cases, the confidence of intermediaries in the business outlook for their own firms remained high.

Sixty-two per cent of intermediaries said they were “very confident” about the outlook for their firms, maintaining the same rates of confidence reported at the end of Q4. Ninety-eight per cent of intermediaries were confident overall, with only a very small minority (two per cent) describing themselves as “not very confident”.

The average number of decisions in principle that intermediaries processed in Q1 rose by two when compared to the final quarter of 2021. Despite a drop in January (to 28 per intermediary), the following two months saw a strong rebound, with February reaching 32 per intermediary and March hitting 37, a two-year high. This rise comes alongside homeowners returning to the market, aiming to remortgage or secure new fixed-rate mortgages.

It is a real positive to see sustained momentum across the mortgage market in terms of demand and activity, but there is still room for all of us to be more efficient and effective in our working practices and to benefit more from the right kinds of tech support. As volatile macroeconomic trends hit personal finances, advisers will continue to play a critical role in helping borrowers to find appropriate, affordable, and sensible deals. In the same vein, it is also vital for advisers to integrate cost-effective technology to better support efficiency, productivity, and engagement with clients and within the workforce.

So maybe this is the time to assess what we have learned from an individual and business perspective over the course of the pandemic and evaluate the role technology can play in helping overcome any lingering issues. In doing so, advisers offer themselves a better chance of establishing that all-important work-life balance and really being able to embrace those all-important elements of time, efficiency, and choice. M I JUNE 2022 MORTGAGE INTRODUCER

21

REVIEW

BUY-TO-LET

Down valuations don’t equal downturn Richard Rowntree Managing director – mortgages, Paragon Bank

M

any of us have a personal, vested interest in the property market, and over the past couple of years this has grown as the pandemic has prompted us to re-evaluate what is important about our homes and where they are located.

This piqued interest means that property is regularly the target of speculation, and the market being as buoyant as it’s been for some time now leads to the almost inevitable question of how long the boom will last.

Rising inflation and the costof-living crisis are not just widely reported but are actually being felt by us all at the petrol pumps and when we pay for our groceries and utility bills. This is adding to the sense that the economy cannot sustain such growth in property prices, and it seems that people are looking for clues that the bubble is about to burst.

Surveyors ‘down valuing’ properties is seen as one such clue. The thinking behind it is that lenders are increasingly willing to lend only the amount that they foresee a property being worth once the market passes its peak.

Although I can see the logic behind this and recognise that there is a lot pointing to a slowdown of the market over the remainder of this year and into the next, it could be argued that artificially elevated prices are actually a sign of the market’s ongoing momentum, which is enough to sustain the

22

MORTGAGE INTRODUCER JUNE 2022

sector for the foreseeable future.

To understand why this may be the case, we must note the differences between estimated and market-tested property values.

Over the past two years – and maybe even before that, if we think about the impact of Brexit – the property market has been subject to some novel influences.

The race for space has meant that the right properties, particularly those with outdoor space located commutable distances from major cities, are much more desirable to buyers than they may have been previously or if they were located somewhere else.

With buyers relocating to areas where they get more for their money, we see some who may be willing to pay more than a local would. And the relocators are not just willing, they’re also able, because property prices rising at the fastest rate in over a decade have left some enjoying substantial amounts of equity.

Another key driver of properties receiving unrealistic estimated valuations is the fierce competition for homes resulting from prolonged high tenant demand combined with a severe shortage of stock available to buy.

In a survey of landlords carried out on behalf of Paragon, 62 per cent of respondents reported increasing tenant demand – an all-time high.

Alongside this, March was the first month since July 2020 when respondents to RICS’ Residential Market Survey reported an increase in landlord instructions, causing a net increase of six per cent from -21 per cent the month before. (April then saw a decrease in new listings.)

This competition has resulted in a rise in sealed bids, which are often over market values and further add to

the anomalous pricing of properties.

So we see some scenarios in which buyers may well be willing and able to pay more for a particular home than the broader market value, and we also have to take into account how much sellers perceive their homes to be worth. If we own an asset, we tend to put a higher price on it than we would be prepared to pay someone else for it.

While it’s often said that the value of something is whatever someone is willing to pay for it – true for many goods and services – it’s not the case with mortgage borrowing. Lenders have a responsibility to protect their businesses and their borrowers, and mortgage lending regulations have become much more stringent in the wake of the global financial crisis.

In the case of property, valuations consider a number of factors, and surveyors are subject to standards set by the Royal Institute of Chartered Surveyors. This means that values have to be evidenced, so it’s highly unlikely that a valuation could be based on what a lender predicts the value of a property will be in the event of a downturn. Instead, valuations reflect how much the property is worth when it is valued.

In the rental market, we also consider the potential to generate income when assessing affordability.

This means that an HMO located close to a university, for example, could have a significantly higher value than an almost identical property found in an ordinary suburb with no real demand from local students.

Of course, in business, success can be gained by looking at the range of factors influencing a market and forecasting how this may change in future, but in the case of buy-to-let it is important to look at the long-term fundamental drivers of demand.

Societal changes like a growing population and an increase in the number of single-person households, along with a decades-long deficit in the number of social homes needed to meet demand, mean that demand for rented homes will continue for years to come, even if not at the level we’ve seen of late. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Helping landlords raise the EPC bar Steve Cox Chief commercial officer, Fleet Mortgages

N

ow that we are halfway through the year, it is possible to have a much clearer idea of what the defining issues of 2022 have been and what is likely to happen in the six months ahead.

Undeniably it’s been a topsy-turvy six months, with a huge number of conflicting issues and challenges making for a difficult environment to work through, particularly for advisers who are having to deal with product/criteria changes on a bewildering level.

In the buy-to-let space, we have an environment that appears relatively stable, albeit with the caveat that it is subject to many headwinds, and, of course, ours is not a sector that is immune to ongoing issues, particularly when it comes to rates, capital markets, and the like.

One of the biggest headwinds is, of course, the level of property supply within the private rented sector (PRS), and the impact this has, particularly on the attraction of property as an investment.

We know for a fact that existing landlords remain highly committed to the sector and want to add to portfolios because of the strong tenant demand that exists. However – as with the owner-occupier market – it is finding, and being able to access, property that’s up for sale that is a very real challenge.

The latest RICS report appeared to suggest that the number of properties coming up for sale has increased recently; however, this has to be couched in terms of purchase demand, which has also increased. www.mortgageintroducer.com

You have to seriously wonder whether the regulatory and taxation measures brought in over the last decade or so have really helped the PRS or merely helped diminish available property to let, just at the time when it was more needed than ever.

While I mentioned existing landlords, I think we all know that new blood is needed in this space, and again, you have to question whether the hurdles and obstacles that wannabe landlords have to surmount in order to enter the PRS are simply too high.

The other big issue in the buy-to-let/private rented sector is, of course, around all things ‘green’ – energy efficiency and, more specifically, minimum EPC levels that rental homes may have to meet.

Again, I write “may” because those measures are not yet set in stone, but it seems highly likely that a minimum of EPC level C will become the norm for new and existing tenancies over the next few years.

That in itself has meant a significant amount of gnashing of teeth around the requirements, whether landlords can meet them for certain homes, what this could mean for PRS supply, and what lenders might do in order to incentivise landlords to improve their EPC levels sooner rather than later.

I would be the first to admit this is not an easy issue to resolve, but I can’t help but feel that the initial attempts at green mortgages, for example, have been less than inspiring. They seem overly focused on rewarding those landlords who have already purchased properties at EPC levels A to C, in a margin giveaway, rather than being aimed at supporting those who need to carry out the work required to get to these standards.

That has to be the major priority

for lenders: not simply seeking to beef up the mortgage books to have as many A–C properties as possible, but rather helping to raise the EPC bar for those whose properties are not yet at the standard.

This, again, is a major challenge, because landlords already have a significant number of costs to factor in when bringing a property to the PRS, and while some properties might not need much to improve their EPC, others may need a large amount of (quite costly) work.

In that sense, I suspect advisers are going to play a crucial role here because the likelihood is that landlords will need help in (re)structuring their debt to help them pay for the works. For portfolio landlords who have multiple properties requiring action, this will be particularly important, but there is clearly an opportunity here, especially if they are able to take advantage of potential capital gains made over the last few years.

We should also think about whether there is an opportunity for further advances – difficult for those lenders that securitise – and whether the lender fraternity could be more flexible in terms of its acceptance of second-charge mortgages, both of which are likely to be an option for landlords seeking to fund works – providing, of course, that the primary lender either offers or accepts them.

Essentially, for advisers this will be all about working with landlord clients to ensure there is a plan in place – a plan that highlights those properties that may not meet the new standards when they are in brought in; a plan that highlights the work required; a plan that highlights the cost; and a plan that highlights how the work is going to be funded.

This is not going to be an issue just in the opening six months of this year or the next six months; it is going to be around for a number of years to come. So let’s look at what we can do as advisers and lenders to support our landlord borrowers to meet this challenge, and to provide the financial solutions necessary to meet these standards. M I JUNE 2022 MORTGAGE INTRODUCER

23

REVIEW

BUY-TO-LET

Market factors boosting growth potential of BTL sector Cat Armstrong Mortgage club director, Dynamo for Intermediaries

T

o fully understand the buy-to-let market, we also have to appreciate the factors at play throughout the purchase arena and the financial squeeze being placed on potential first-time buyers (FTBs), many of whom are currently renting. Now, you would probably struggle to fit all these factors into a book, never mind an article, so I’m not going to try to dip too deep into these, but one obvious place to start is rising house prices, deposits, and upfront costs.

HOUSE PRICES AND FTB FISCAL DEMANDS

New research from Zoopla outlined that a £29,000 rise in the price of an average UK home has seen an estimated 4.3 million homes being pushed up into a higher stamp duty bracket since the start of the pandemic. Twenty-eight per cent of the affected properties are now said to have moved above the initial £125,000 stamp duty threshold in England and Northern Ireland.

In Wales and Scotland, rising house prices also mean that a further 360,000 homes have been pushed across the initial threshold at which stamp duty becomes payable (£145k in Scotland, £180k in Wales).

Rising house prices are also having a huge effect on those keen to get their foot on the property ladder.

First-time buyers are now spending an average of £225,000 to buy their first home – an increase of £27,000 compared to just two years ago. This means that this group of prospective buyers now requires an additional £4,000 for a deposit, despite average

24

MORTGAGE INTRODUCER JUNE 2022

annual earnings increasing by only £2,704 over the last two years. They also need an additional £5,000 in annual household earnings or income in order to secure a mortgage, which equates to £417 per month.

These figures demonstrate the fiscal impact on FTBs, and the ability to add to any saving pots is likely to diminish further as escalating living costs swallow up a growing percentage of household incomes; for tenants, rising rents are also playing their part. So, with some homeownership aspirations being tempered – for now at least – it’s little wonder that the private rented sector is experiencing such strong levels of tenant demand.

TENANT DEMAND

This was outlined in recent data from Paragon Bank, in conjunction with BVA BDRC, which suggested that the first quarter of the year saw the number of people seeking privately rented homes grow consistently.

The 62 per cent of landlords who reported increasing tenant demand in Q1 2022 was said to be double that of the same period a year ago and almost four times the level reported in Q1 2020, when only 16 per cent of landlords felt that demand was growing.

In addition, when asked to assess tenant demand over the previous three months, 34 per cent of landlord respondents reported a “significant increase”, with a further 28 per cent reporting slight increases. Perceived decreases in tenant demand, both significant and slight, were recorded by just three per cent of landlords, the lowest on record.

Analysing the results regionally highlights the impressive resurgence of the Central London rental market.

Increasing tenant demand was reported by 84 per cent of landlords operating in the inner capital, a

substantial increase on the 12 per cent seen in Q1 2021. This places Central London alongside the South West and Wales as the regions seeing the highest levels of increasing tenant demand during the previous three months.

This data really does speak for itself, and the fact that we’ve seen another record high in the proportion of landlords reporting increased tenant demand outlines the sustained potential on offer across the BTL sector, alongside a pressing need for additional rental stock across the country.

THE GREEN MORTGAGE MARKET

Alongside the requirement for additional rental stock, issues also remain around quality and suitability, especially for older properties when it comes to meeting potential future legislation around improved EPC ratings for rental purposes.

Thankfully, the number of green mortgage offerings is growing across the BTL sector, with a recent study from Defaqto suggesting that there are now more than three times as many mortgages available to landlords. At the time of study in late April, there were said to be 292 green buy-to-let products on the market, compared to just 85 last October. Conversely, the number of green mortgage products available to residential borrowers has fallen, with just 356 mortgages available compared to 465 last year.

This marks a highly encouraging trend for this key area of the market, and energy efficiency is something that landlords will need to evaluate carefully for individual properties within their portfolios in future.

And, as always, the advice process can prove integral to ensuring that the right solutions are accessible, and the right decisions are being made at the right time. M I www.mortgageintroducer.com

REVIEW

RESIDENTIAL

Taking the stress out of product withdrawals Jonathan Stinton Head of intermediary relationships, Coventry for intermediaries

A

ffected by volatility in the UK economy, the mortgage market has recently seen lenders pulling and modifying various products, often at short notice or even with no warning at all. This has put additional pressure on brokers who are already struggling for capacity – withdrawals require them to drop everything else in their busy schedules to respond quickly, and also leave their clients with a shorter window in which to make such a decision.

So, what has caused this influx of withdrawals? And how can brokers and lenders work together to prepare for unexpected product changes, thereby making the application process smoother and less demanding?

EXPLAINING THE SURGE

The UK economy is facing some challenging times as the cost-of-living crisis bites. Rising inflation has pushed the Bank of England to raise interest rates, and, as brokers will well know, this has seen lenders up the frequency of product changes and withdrawals. Today, lenders modify and reprice products more frequently. In fact, Moneyfacts found that the average shelf life of mortgage products plunged to a low of just 21 days in April 2022. In contrast, the average in April 2020 was more than double that, at 48 days.

For brokers, that can cause a whole host of issues – a sudden product reprice or withdrawal can create havoc in the submission of applications, and can also cause www.mortgageintroducer.com

duplication of work, with brokers needing to re-source products on multiple occasions. How, then, can brokers and lenders work together to overcome the challenges these changes pose?

TAKE ADVANTAGE OF SUPPORT

Brokers who are feeling stressed about product withdrawals should reach out to lender support teams as their first port of call. Although this may sound like sacrificing more time from their already strained schedules, which brokers are understandably reluctant to do given their high workloads, in reality it means saving time and work in the long run. With most lenders’ support teams having webchat functionality, brokers can receive support for case enquiries quickly and conveniently.

Business development managers also offer support. While they might not know exactly when lenders are going to pull products from the market, they can provide added insight into the market landscape.

With more lenders also offering telephone business development managers (TBDMs), it is now easier than ever for brokers to access BDMs with minimal inconvenience.

BDMs are a trusted source of information, being experts on specific types of products as well as the wider market. It’s critical for brokers to stay up to date with market-wide trends and industry developments, but with a high number of applications to process, capacity can be limited.

It’s therefore crucial that brokers maintain a good relationship with their BDMs, who will have all this vital intelligence at their fingertips, including how specific products are faring on the market.

If, for example, brokers learn from BDMs that certain types of

products have recently been pulled from the market, they can deduce that similar products from other lenders might also be pulled and can prepare accordingly. Likewise, by speaking with a BDM about regulatory changes, brokers may also sense that certain products are unlikely to stay on the market for much longer or could be modified to adhere to changing regulations.

With this knowledge, brokers can then focus their efforts on preparing and submitting applications before products are withdrawn.

LENDER NOTICE PERIODS

It’s also a good idea for brokers to stay up to date on each lender’s notice periods and policies so that they can be as prepared as possible when a product change is announced.

Some lenders have a standard notice period and policy by which they will abide, usually stated on their website. For example, at Coventry for intermediaries, we have been committed for over a decade to giving brokers at least two days’ notice via email before withdrawing a product from the market. This gives brokers the time they need to gather all relevant documents, speak to their clients, and submit full applications without the pressure to work out of hours. Alternatively, some lenders offer brokers a buffer period after a product is withdrawn, providing them with extra time to get their applications in.

Whilst short-notice product withdrawals are far from ideal for either broker or lender, it’s important that both parties work together to ease the process while market uncertainty remains. Maintaining open communication and fostering strong relationships with BDMs, lenders, and their support teams can prove to be a huge advantage when it comes to product withdrawals, and by keeping track of lenders’ policies and notice periods, brokers will be in a better position to organise and prioritise applications, ultimately making the process more streamlined. M I JUNE 2022 MORTGAGE INTRODUCER

25

REVIEW

SERVICE

Service is still the key Bob Hunt Board member of Society of Mortgage Professionals and chief executive of Paradigm Mortgage Services

T

here are few things as prized in our market as service excellence. As you will have heard countless times before, building a strong reputation for this can take a very long time – and be destroyed in a matter of moments.

In the current market – regardless of what type of stakeholder you are – service seems like the most important aspect of our business offerings. However, as we are all too acutely aware, just because we might be on top of our game in terms of our client-facing duties, that doesn’t mean the overall experience will be of the highest standards.

That, of course, is an issue, but it’s not one we are ever going to get over. The fact is that you are reliant on others to bring a case home to completion, and you will have to put your faith in those others at various crucial points of the customer journey.

Of course, the choice of who you deal with is vitally important in that regard. In a very real way, you will be judged by the company you keep; it’s a very good reason why, when the original regulatory rules for the mortgage market were being considered and consulted on, our ‘founding fathers’ wanted to ensure a choice made on price alone wouldn’t override everything else when an adviser was weighing up a recommendation. Praise be for that.

At present, being able to choose based on service – particularly lender service – seems to be absolutely vital.

The adviser community does not need me to tell them what is happening right now in our marketplace; they deal with it every single day – and in some cases, it’s not pretty.

It has struck me lately that too

26

MORTGAGE INTRODUCER JUNE 2022

many have taken their eyes off the ball when it comes to delivering service excellence. This is despite the fact that service is the only sustainable competitive advantage to be secured in an ultra-competitive market in which, for example, there are only so many levers to pull to bring in business.

For instance – and this is as relevant to advisers as it is to distributors like us and to lenders – you might ‘innovate’, but that innovation will tend, at some stage in the future, to be copied. As an example, at Paradigm, we began to innovate in terms of how we rewarded member firms through a profit share and rebate, knowing it was going to be only a matter of time before others did their best to follow the model.

Price is clearly also a major lever available to businesses; you can lower yours, you can chase it to the bottom and try to bring in business this way, but ultimately it’s likely there will always be someone who can say they are going to provide what you do for less. Some are big enough to be able to make their product a loss leader. How low can you go – and for how long – before that just isn’t sustainable?

Or you can look at differentiation via service – reliable, consistent, time-conscious, value-adding service and support that delivers exactly what it says it will, within the required time. That’s essentially what I’ve always tried to do, as I’ve also tried to make sure the business stands out for delivering this.

This is a real strategy, one that recognises the importance of service to your customers – in our case, advisers; recognises their needs, recognises how their reputations can be affected, and recognises (and seeks to help them keep) the promises that they have made to their customers. It’s no different if you are a lender or surveyor or conveyancer – the process is the same.

Looking around the marketplace at the moment, do enough businesses that we all rely upon have service

excellence anywhere near the top of their list of priorities?

Dare I say it? Perhaps some of the leaders in our mortgage market need to take a metaphorical helicopter ride and survey their own businesses.

Looking down at what they are offering, they can then ask themselves, “Is this really the best we can do?”

Perhaps it’s really a case of going back to basics for them. If they need a place to start, the age-old “Would it be good enough for my mum?” test will immediately tell them whether they are on anywhere near the right path, let alone walking along it. Would the service we offer satisfy her?

An honest answer to that playingfield leveller of a question will at least get them to begin working through why they might be in their current position, where the specific problems are, and how the business can get out of any hole it might find itself in.

And the benefit of this? Well, you can guarantee that not all competitors will be willing or able to look this honestly at their current service offering. They might not see the value in doing this, or of changing anything, preferring to muddle along, perhaps trying to solve it by ‘innovating’ or ‘repricing’ to get themselves out of a hole – only to find weeks/months later that they are still in it, and perhaps even deeper.

There is undoubtedly real value to be had in delivering on service.

Customers will appreciate it, and it is fundamentally the only longterm sustainable plan to ensure your business remains competitive. M I www.mortgageintroducer.com

therightretirement.co.uk

You’re protected, but is your business?

Finding yourself unable to work for a period of time can be stressful, but imagine you are facing a period of sickness, or perhaps you just need to take some time away?

When you're self employed this can be an extra concern,but what if you could take a breather and retain an income?

therightretirement

Directly authorised advisers welcome

Other network members welcome

It's all possible with The Right Retirement.

Contact Kevin Dennis today

01564 732 749 Kevin.Dennis@therightmortgage.co.uk

SCAN ME

REVIEW

PROTECTION

Worries around finances may affect mortgage market Kevin Carr Xxxxxxxxxx Protection review

xxxxxxxxxxxxxxxx, CEO and MD, xxxxxxxxxxxxxxxx Carr Consulting & Communications

O

NS has just released the news that house prices increased on an annual basis by 9.8 per cent in March.

On the face of it, this may seem positive news, but this is down from an increase of 11.3 per cent in February, and there is an expectation that this downward trend will continue in the coming months.

Looking at the new LifeSearch Health, Wealth and Happiness index, it’s clear that Brits are becoming increasingly worried about their finances, and these fears are a significant factor in the cooling of the housing market.

Almost three-quarters (72 per cent) expect to be financially worse off this year. On average they believe they will be more than £3,000 out of pocket.

This equates to over £250 a month, a substantial amount of money that is likely to force people to think carefully and decide where best to spend their money and what to cut back on.

The survey shows there is a rising fear about finances – 41 per cent fear rising bills, 24 per cent fear lack of savings, and 16 per cent fear not being able to pay their bills. This is not a climate in which people will make quick, bold decisions. They will be thinking about what will benefit them and their families in the long run.

The uncertainty around rising prices, the war in Ukraine, and the general economic outlook is making people think twice about committing to large purchases, such as moving house or buying a new car. Thirteen per cent of all UK adults said they had put off big expenditures in the last year, with this

28

MORTGAGE INTRODUCER JUNE 2022

number rising to 19 per cent among those aged 35 to 44. This is particularly true for those at the lower end of the pay scale. More than a quarter (28 per cent) of those earning £20,001 to £30,000 a year have delayed making these big purchasing decisions.

It’s likely that this will affect the bottom end of the housing market most in the coming months, with potentially fewer first-time buyers willing to take the plunge on buying a home. In turn, this is likely to have a knock-on effect higher up the property ladder, with fewer people looking to move upwards.

PROTECTING WHAT MATTERS MOST

This gloomy picture around finances is also reflected in the happiness and health levels in the index, which are at their lowest levels in a decade. The pandemic has had a massive impact on British life, with many people feeling worse off than they did before. The bullish feelings shown in the 2021 survey have evaporated, replaced with a sense of uncertainty about the future.

The pandemic revealed the fragility of our health. It showed that anyone, no matter how fit and healthy, could be struck down with an illness that could seriously affect their way of life.

This seems to have particularly hit home with the younger generation, with six per cent of 18- to 34-year-olds considering taking out life insurance and income protection in 2021.

These numbers may seem small, but they are significantly higher than in the

past. With a squeeze on finances already happening for many, people are thinking carefully about how and where they spend their money to protect themselves and their families.

More and more, they will be looking to mortgage lenders for support and reassurance – first around how they can best protect their payments from rising interest rates, and then regarding how they can protect themselves.

NEWS ROUND-UP

• Legal & General paid out almost £800mn in individual protection claims during 2021, benefiting 16,890 customers.

• According to new research from CIExpert, 67 per cent of mortgage and protection advisers will continue to conduct more than half of their client meetings virtually this year, while around one in five (22 per cent) noted that they would carry out all client meetings online, despite the removal of COVID-19 restrictions.

• Aviva’s protection and health business posted a 10 per cent increase in sales to £696mn in Q1 2022, up from £630mn in the same period last year.

• Shepherds Friendly has launched a simplified application process for income protection as part of a wider strategy to offer a more streamlined application process to advisers.

• Aegon UK has launched a new adviser dashboard that brings together all protection applications in one online platform. M I www.mortgageintroducer.com

REVIEW

PROTECTION

New blood is the way forward Xxxxxxxxxx Mike Allison Head of protection, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Paradigm Mortgage Services

I

t’s no secret that the UK has an ageing population and workforce, and from a new set of data released by the ONS in May for Q1 2022, we can also see a rise across the board of those in work.

Sterling benefited from surprisingly positive data released in the middle of May, with unemployment and wage figures both surpassing expectations, painting a more positive picture for the British economy than had been expected. The number of UK workers on payrolls continued to hit new highs, rising by 121,000 between March and April to 29.5 million.

Mortgage advising, like all business sectors, will be forced to adapt to the impact of this changing demographic.

More older people are working, but are obviously liable to retire. In a past survey, Aviva found that 61 per cent of adults are not keen on the prospect of longer working lives.

What, then, can be done for the exit-seekers? Directors of adviser firms, already skewed towards the older generation, are in a constant conundrum – “When do I retire, and what do I do with my business?”

Most advisers imagine they will build up a business with a bank of clients and that, when they are ready to exit, their book will have some sort of value. The difficulty comes in determining that value. Thought processes range from “It will be worth a multiple of annual income” to “It won’t be worth anything as people buy people and therefore all you are selling is goodwill”.

The complexity comes in the fact that mortgage advisory firms are highly transactional, earning fees upon successfully sourcing mortgage products for customers. Revenue by nature isn’t recurring, nor is it anchored www.mortgageintroducer.com

to an easily measurable metric as it is for other financial service businesses.

Transactional businesses struggle to generate the kinds of ‘sticky’ clients who become firmly attached to the value of a business. The oft-used example for comparison is a wealth management firm – counting assets under management is one easily measurable metric, and clients also tend to be in search of long-term advice rather than one-off deals.

Retaining clients over a long period of time and being able to prove that income is not an easy task, but there are tools on the market, such as Dashly, proving that long-term income is definitely doable. However, to continue the success of a mortgage business, it is the people and their relative knowledge of the market they operate in that are important.

Increasingly, firms are looking to recruit young people from outside the industry, either to train them on mortgage/protection helpdesks or bring them in to start distributing relatively simple products to meet client needs.

In the case of GI, as an example, taking an average premium of around £350 for a household case, that will generate an income of approximately £100. Similarly, an average life premium of, say, £480 p.a. will generate almost £1,000.

The current average graduate salary in the UK is just over £24,000 according to the Graduate Outcomes report issued by HESA (Higher Education Statistics Agency) earlier in 2022. However, the same report stated a range starting at £16,000, depending on location.

Ultimately, the average figure is just that, an average – but it would not take too long for a well-trained graduate to start to add value to a business and more than cover costs even in the short term by distributing life and GI products.

By learning the process of factfinding, research, and report writing, an intelligent person is at least on the way to building a career.

We all know that creative thinking

is needed to find a solution to the issue of retirements, but finding a model that works for the newcomer to the business and the business owner is key.

Under new Consumer Duty rules, it may well be that life insurance advice as well as GI will become even bigger features of a mortgage sale, and to have someone in place as a specialist may be invaluable.

Although our industry does have its challenges, it also has its rewards when clients find their dream home and know they are protected in the event of accidents or worse.

People who choose something they are passionate about, or at least enjoy, work harder. Longer term, such people may want to take the step of moving into a leadership position in a business – so the earlier the succession planning starts the better.

Businesses such as Paradigm can help provide much-needed learning in a new recruit’s early days and keep that recruit on track throughout the first few months, saving the firm’s owner from having to spend all their time on training.

All in all, firm owners need to have a strategic plan in place if they want to seek an exit but keep the business a going concern. New blood is thus vital, so don’t wait too long to get your situation in order. After all, none of us is getting any younger. M I JUNE 2022 MORTGAGE INTRODUCER

29

REVIEW

GENERAL INSURANCE

Tighter belts: How can we help?

Emma Green Director of distribution, Paymentshield

W

hen energy prices shot up in April, UK households started suffering the worst squeeze on real income in 30 years. As of March 2022, approximately nine in 10 UK adults (87 per cent) had already reported an increase in their cost of living. The following month, our research showed that 61 per cent of the British population were seeking to reduce their spending.

As the year unfolds and costs continue to spiral, consumers will face some serious challenges in order to take control of their personal finances, buffer the strain of inflated prices, and keep unexpected expenses at bay.

Naturally, we may expect many consumers to come forward and seek professional advice about becoming more financially resilient. Yet our latest survey of 2,059 UK adults in April 2022 found otherwise, indicating a widespread reluctance to seek assistance, with over one in five UK adults deeming talking to financial advisers “overwhelming”.

The high levels of embarrassment associated with asking questions about finances are glaring. This is why, during last month’s National Conversation Week – a campaign aimed at getting people to talk more about their finances – we encouraged advisers to proactively anticipate questions that could help consumers manage their finances and achieve long-term financial wellbeing in a time of economic turmoil.

‘IS NOW A GOOD TIME TO REMORTGAGE?’

This is a question likely to be on the minds of many British homeowners

30

MORTGAGE INTRODUCER JUNE 2022

whose bills – including their mortgage payments – will continue to rise with their deeper economic struggles.

Many consumers will be interested to know whether they can get a better mortgage rate, and this could be a strong option for many looking to tighten their belts. Yet we know that remortgaging has often been an overlooked area when it comes to advising on financial prudence. In a YouGov survey of nearly 5,000 UK adults that we conducted at the end of last year, we found that of those who had remortgaged in the previous two years, a huge 47 per cent said they had done this independently, signalling that remortgaging is still a vastly untapped area for advisers.

As well as being a financially worthwhile decision for the client, remortgaging can also be a golden opportunity for advisers to ascertain whether their customers’ proposition continues to be fit for purpose by offering them a GI review at the same time.

‘IS INSURANCE LESS OF A PRIORITY NOW?’

Many policyholders will also be wondering whether they’ve struck the right balance between insurance cost and coverage. This resonates with our most recent research, in which 15 per cent of UK consumers said that in the next 12 months they would be likely to reduce their spending on insurance products. The affordability issue instigated by the rising cost of living is likely to see many customers choosing cheaper policies, or even cancelling them altogether.

But while cutting down on spending is one way to save, we must all ensure that clients understand that any costcutting exercises should not come at the expense of proper coverage, which can help insulate them from hefty, unexpected costs further down the line.

This is where advisers should leverage their expertise, helping their clients to navigate insurance offerings by assessing which policies and products are financially worthwhile in the long run and better suited to their needs.

‘HOW CAN I FEEL MORE IN CONTROL OF MY FINANCES?’

The inflation-induced scramble to cut costs may also result in customers shopping around and turning to comparison sites for short-term salvation. But when considering longterm financial health, the value of a few pounds shaved off an insurance policy may not be the wisest way to save.

By favouring price over quality, comparison sites overlook the true meaning of value to the customer – that is, their policy actually being of worth and suited to their specific needs.

Instead, being in control of one’s own finances means receiving tailored support throughout life’s different turns – whether it’s about purchasing a property, changing profession, or navigating an economic downturn. This is why, in the face of rising living costs, we encourage advisers to take proactive steps to initiate GI conversations with their customers. Re-evaluating whether any circumstance or priority has changed since a customer’s last review will avoid leaving them financially exposed, ensuring they aren’t wasting money on products that are no longer fitting.

NO SILLY QUESTIONS

The rising cost of living has triggered greater uncertainty about how to manage finances effectively. Navigating these choppy waters naturally raises important questions, which we cannot afford to leave unanswered.

Many consumers may be reticent to start a ‘money talk’, but advisers can empower them to make the most worthwhile decisions at the right time.

Not only will this approach bring financial wellbeing to their clients, but it will also instil the idea that there really are no silly questions. It will encourage them to look for valuable, professional advice and give them the confidence to seek support rather than staying silent. M I www.mortgageintroducer.com

REVIEW

CONVEYANCING

Legal partners vital in ‘bank of mum and dad’ deals Karen Rodrigues Director of sales, eConveyancer

T

he ‘bank of mum and dad’ has played an increasingly important role in the UK housing market in recent years. A new study from YouGov has suggested less than half of first-time buyers purchase a home entirely independently.

It found that only 41 per cent of first-time buyers managed to get onto the housing ladder without financial backing from loved ones. In all other cases, the so-called bank of mum and dad played some role.

Little wonder that some have described it as one of the biggest lenders involved in the mortgage market, while its importance is only likely to grow in the months ahead as economic factors start to affect everyone’s finances.

WHY PARENTAL HELP WILL CONTINUE

First and foremost, here is the rate of house price growth. According to the latest data from the Office for National Statistics, the average house price in the UK jumped by 10.9 per cent in the year to February 2022, taking the average property price to £277,000.

In cash terms, that’s a rise of £27,000, an extraordinary rate of growth.

That rate of increase makes it incredibly difficult for would-be buyers to put together a sufficient deposit, meaning that more and more have to ask loved ones for some assistance.

It’s not just a question of house prices, though. The ongoing cost of living crisis will inevitably have a knock-on effect on the affordability calculations lenders undertake, which may limit what they are comfortable offering to www.mortgageintroducer.com

hopeful buyers. If there is then a shortfall between the maximum mortgage amount offered and the funds needed for the purchase, buyers will, of course, want to ask their loved ones for support.

In some cases this may mean opting for one of the innovative family-based mortgages that some lenders have developed. These may involve relatives using their own home or savings as security, or going down the joint borrower/single proprietor route.

However, for others, the simplest answer will be receiving cash support that they can use to get that dream purchase over the line.

LEGAL EXPERTISE IS CRUCIAL

Working out the best mortgage option for clients in this position is of the utmost importance, and doing so is a job for which brokers are well equipped.

But it’s important not to overlook the role of the conveyancer when it comes to these family-assisted purchases. Lenders always want to have a clear idea of where any funds related to a purchase are coming from, and how they are being offered. Is it a gift from parents to children, helping them boost their deposit, or is it a loan between family members that will need to be paid off at some point?

There will also be money-laundering checks required regarding the source of these funds, to ensure that everything is as it should be.

All of this simply reinforces how crucial it is to have conveyancers that can be relied on. A legal partner who doesn’t have the necessary experience in this area can result in significant problems down the line, potentially even putting the entire transaction at risk.

WHO DO YOU WANT TO WORK WITH?

Speak to any mortgage broker, and they will tell you that the market is only becoming more complex. The days of

the vanilla borrower are largely over, and not just because of the difficulties of the pandemic.

All of which only emphasises the value of working with an experienced panel manager. At eConveyancer, for example, we have spent a lot of time building a formidable panel of conveyancers for brokers and their clients to turn to, a panel that not only boasts substantial general property experience but can also cover niche transactions when specialist advice is required. This could mean purchasing with family members through a limited company buy-to-let, or through shared ownership, where an expert eye can make all the difference.

Partnering with the right firm can deliver peace of mind for brokers, safe in the knowledge that no matter what challenges may emerge, the legal team is well positioned to handle it competently.

Crucially, the right partnerships also mean that clients enjoy a more positive and stress-free experience. M I JUNE 2022 MORTGAGE INTRODUCER

31

ROUND TABLE

MARKET

Mortgage market facing an uncertain future Mortgage Introducer’s Paul Lucas hosts a discussion on what’s ahead

T

he mortgage industry may have fallen on the right side of the COVID-19 pandemic, with house prices rising and the market thriving as people rushed for more space and to escape their city-based lifestyles. Now, however, a new shock is hitting the system: the cost-of-living crisis. Household bills are rising across the board, the Bank of England has hiked rates, and there could be worse to come.

So, how will all of these factors affect mortgages for buyers?

No one has a crystal ball, but Mortgage Introducer did the next best thing and, in association with Barclays, gathered together a collection of experts from eConveyancer, John Charcol, Try Financial, Pure Retirement, and Barclays itself to offer their insights into what we can expect to see unfold.

TOO EARLY TO SEE REACTIONS The cost-of-living crisis is here. Energy companies are warning that 40 per cent of customers face fuel poverty, and it’s expected to get worse when the price cap is reviewed again in October. The economy has also reached a 40-year high in the rate of inflation, currently at nine per cent, and many commentators feel it will only continue to rise.

However, Nicholas Mendes, mortgage technical manager at John Charcol, says the impact has yet to filter all the way through the system.

“At the moment we’re still seeing property prices going up month on month, but I think … there is going to be an impact when first-time buyers at some point are going to have to look at it and go, ‘do we make the jump now, or do we want to see how things go?’”

he said. “Though property prices are increasing so much, their deposits aren’t.”

Try Financial’s senior mortgage consultant Peter Sleigh isn’t so sure there will be any change on the demand side. “It’s too early to say if it’s going to change the mortgage landscape,” he said. “I would say longer mortgage terms are probably going to be requested where they can be, but borrowers and purchasers will still want that mortgage, and want it now. I don’t think the approach by borrowers will change; they will just find it more difficult to proceed.”

That’s not to say trends aren’t already being observed in some quarters. The fascinating part is how things will play out, and head of sales at eConveyancer Sam Kirk has already spotted one change caused by the crisis.

“Anecdotally, we’ve seen more product transfers against remortgages,” he said. “The feedback we’ve got from that is it’s because of affordability, not just because of speed, so we think that’s an interesting trend.”

Offering further analysis was Anna Thompson, strategic distribution manager at Pure Retirement, who focuses on the over-55s who want lifetime mortgages. That demographic has shown a marked change, she explained.

“The biggest difference for us is the increase in cash releases, so our clients are accessing their drawdown facility, and it’s not just the number of clients who are accessing that facility, it’s also the sense of urgency that has shocked us,” she said.

“We’ve seen it in cash releases – the number of requests for escalations increases and increases, so that sense of urgency for customers needing that money to pay bills has increased over the last month or so.”

Keen to stress the need for understanding on the

Mortgage Insider Podcast Expert analysis on the topics you want to know about.

IBIM11236-BAR MI-Press-strips-mixed-v3.indd 1

32

MORTGAGE INTRODUCER JUNE 2022

25/05/2022 09:04

www.mortgageintroducer.com

ROUND TABLE

MARKET part of customers was Barclays director of mortgages Craig Calder. He feels that lenders need to inform buyers about how the changing economy will affect the amount they can borrow.

“The mortgage could be a fixed rate, but who would have been thinking about £200 energy bills a month compared to the £60 they would have been paying a few months ago?” he asked.

“There is enough headroom built into the afford­ability calculations [for] lenders, but the affordability calculation is still just a number. The reality for a borrower up front is, how do you think you’re going to manage the next four or five years? How do we build in that realism conversation when we’re talking to customers? Because people just see the house that they’ve got their hearts set on, and they might not think about the cost.”

AFFORDABILITY CRITERIA HAVE TO CHANGE Whether lenders will review their afford­ability framework isn’t so much a question as a statement. The discussion point that everything hinges on is how significant the changes will be and what others are yet to come.

For Calder it’s about staying updated and making sure any lending decisions include the correct costof-living calculations. He said, “Some will argue, ‘Is it a blip?’ I can remember someone telling me COVID was a blip in March 2020, and it would only last three months, and it would all be gone. Is inflation a blip, or is it going to be here for one, two, three, four, or five years? It takes a long time for inflation to come down again, and when you are approaching double digits, it’s going to be there a while.”

Kirk has already started encountering disappointed buyers following crushing meetings with their brokers.

“We’re seeing a greater timeline between quote and instruction for conveyancing, and a lot of feedback from that is saying that customers are having that

“Anecdotally, we’ve seen more product transfers against remortgages. The feedback we’ve got from that is it’s because of affordability, not just because of speed” SAM KIRK

appointment with the broker and probably not getting the news that they were expecting around how much they could borrow,” he said. “So I would probably argue that lenders are already changing affordability, and that impact is already being seen.”

What may also catch the public out is that afford­ ability will become a rolling target. They might get to grips with particular criteria, only to see things change shortly afterwards without much warning. Mendes sees this area as key. “It’s only fair and expected that more and more lenders will jump on to make changes to reflect the cost of living,” he said. “What will be interesting is how readily they decide to update it – whether they do it on three months, or six months, or yearly.”

Of course, affordability tightening is a two-sided coin. From the buyer’s viewpoint it may seem like it’s being made more difficult to obtain a property. In the lender’s eyes, it’s about being more responsible and prudent. Sleigh offered his take on how both sides could reconcile these changes, with brokers holding the key: “If you’re the borrower, it’s more difficult. If you’re the lender, it’s more appropriate, and that’s where brokers come in and have the relationship with the clients to say, ‘You know this is how it is, and it’s not about the rate you’re paying today; it’s whether you can stay in your house for the long term.’”

PRICING RESILIENCE Recent market conditions have pushed prices up, as there are not enough properties to match demand. While getting a mortgage has already been affected by the cost-of-living crisis, house prices have remained immune so far. There are contrasting views on whether this will continue unabated, or change is over the horizon.

“Valuers are curving the price increase; we’re getting lots of feedback of down valuations and problems in the chain because of down valuations,” said Kirk.

“I think valuers are taking charge of the situation and plateauing it for all of us.”

Calder feels this could highlight the naivety of some borrowers. “Is it a down valuation, or is it the [real] valuation? Is it the person who put the property on the market, or the person who thinks when they’re doing a remortgage that their house is the best one on the street because they’ve got the nicest garden, they’ve got the conservatory, and they’ve just done a new kitchen? It’s about being realistic,” he stressed.

Calder also thinks property prices will continue to go up, but not by as much as we have become accustomed

Mortgage Insider Podcast UK economic updates.

IBIM11236-BAR MI-Press-strips-mixed-v3.indd 2

www.mortgageintroducer.com

25/05/2022 09:04

JUNE 2022 MORTGAGE INTRODUCER

33

ROUND TABLE

MARKET

“What would be really interesting is if lenders do things like 10-year fixes and no ERCs after five years ... That would give more homeowners that level of stability” NICHOLAS MENDES to. “I think they will just flatten,” he said. “You’ll see modest growth, and you won’t see the eight, nine, 10 per cent growth that we have been seeing.”

Mendes is also in the slowdown camp. The pandemic created momentum by pushing prices higher, but he believes the brakes will be applied sooner or later. “Why we saw prices increase last year was deposits, accidental savings, and low interest rates and everything else – it was a booming market,” he said. “I just can’t see that continuing, and I do think there will be a slowdown.

Year on year, I think there will be just a small increase.”

For Thompson the situation is different, as she deals with a specialised part of the market, the over-55s.

“Demand is still high, and there does seem to be little stock available – that is the overriding theme,” she said.

“We haven’t seen as many down valuations recently as we did last year and the year before, but we operate at much lower LTVs than standard mortgage lenders. We’re seeing more max borrowing and a lot more confidence at that higher-LTV space, which for us is no more than 55 per cent, depending on age, so we’re still quite low in comparison to the mortgage market. But it does show confidence in the housing market generally.”

Sleigh, meanwhile, highlighted just how tricky it is to get a firm grip on such a rapidly changing situation.

“We’re in uncharted territory with a war in Ukraine and the recent pandemic, and the longer this continues, the less immune the market is going to be. But demand still outstrips supply; as long as that continues, who knows how long it will last? Probably not quite as long as some people think, is my guess.”

rises, and, with more expected, has resulted in a surge in those opting for fixed-rate mortgages. But while that could be the safe choice, it’s not necessarily the best one.

Sleigh is not too perturbed about this. He reckons it will be business as usual despite all the polemic news reports flying around. “In our experience, fixed rates have been the clients’ preference for quite a number of years. So far with the pandemic, when rates came right down, everybody could see they were only going to go one way. We haven’t seen any preference for variable rates, and don’t expect to see any preference for those in the foreseeable future. Fixed rates seem to be the norm at the moment, and it’s just about how long clients prefer to be tied in for, and that’s down to their own individual circumstances.”

Mendes is willing to consider a more maverick path in the current climate. His take on the decision comes down to what the customer thinks may be about to happen. “At the moment I would say there are a lot of tracker rates that are still a percentage lower than fixed rates, so I think it’s more of a question of, do you see the base rate going up by a per cent and a half in the next year or so?” Based on this dilemma, he sees a gap that lenders could fill: “I think most clients are probably edging towards doing a fixed rate. What would be really interesting is if lenders do things like 10-year fixes and no ERCs after five years. That would be a nice introduction to the market and give more homeowners that level of stability without being tied in.”

Engineering new products is also a line of thinking that resonates with Thompson. While Pure Retirement only offers fixed rates, there is a trend that’s coalescing around trying to find a middle ground. “What’s interesting for us is we’ve come from a market that’s seen a lot of variable ERCs, and we’re now moving towards fixed early repayment charges,” she said. “All of our plans have fixed ERCs available, and they start

FIXED-RATE SUPREMACY It’s the old chestnut debated by every buyer with a furrowed brow: Should they get a fixed rate, or roll the dice and opt for a variable rate? The decision has become even more critical in the wake of the BoE rate

“We haven’t seen any preference for variable rates, and don’t expect to see any preference for those in the foreseeable future.

Fixed rates seem to be the norm at the moment” PETER SLEIGH

Mortgage Insider Podcast Tips to future proof your business.

IBIM11236-BAR MI-Press-strips-mixed-v3.indd 3

34

MORTGAGE INTRODUCER JUNE 2022

25/05/2022 09:04

www.mortgageintroducer.com

ROUND TABLE

MARKET

“Explore all options. There’s so many variations on mortgages, including lifetime mortgages, and the options that are available to clients now in the later-life space are vast” ANNA THOMPSON at eight years, then 10, and then 15. We’re seeing a preference for that, I think just for clarity and for security.”

As far as Kirk is concerned, the proof is in the pudding.

“You’ve only got to go back 10 years to see probably around only half of mortgages were done on fixed rates, and now it’s up in the high 90s, so it’s not my job to say whether it’s the best option, but that seems to be what people are generally going for,” he said.

Kirk also discussed a synergy he sees with the energy market, as bills have shot up and sent panic through many households. Prior to the current cost-of-living crisis, very few consumers fixed their costs, and just switched providers based on the best tariff available.

“People are desperate to see their energy tariff on fixed rates, and will that go across to mortgages? It will be really interesting over time to see whether the two-year and five-year now become a five-year and a 10-year as the more prudent options,” he said.

In an era when information is so readily available, there are too many armchair experts. And Calder believes some borrowers fall into that bracket when deciding what option to choose. “Someone is always going to think they can call the market more than the professional adviser sitting in front of them, or they have read something, and because there is a differential between the base price of a fixed rate and the spread over BoE base rate for a tracker rate. It’s hard to know how a customer will predict that as we go forward.”

The post-pandemic effect also means many people no longer have certain costs that burdened them previously, such as travel costs. Calder is concerned that they might overestimate their purchasing power.

“A lot of people have more discretionary spend since the pandemic because they are not commuting, but actually, everything is going to get more expensive, so fixed could be the way to go for most people from an

advice and a personal choice point of view,” he said.

RETURN OF NO-DEPOSIT MORTGAGES It wasn’t very long ago that 100 per cent LTV products were on offer, and that went a stage further with 120 per cent LTV available too. With property prices on an upward trajectory that is expected at worst to only slow slightly, could this be the time to return to nodeposit deals? The contrasting views from our round table proved how divided the industry is on this topic.

One proponent is Mendes.

“I’m not going to say no [to 100 per cent LTVs],” he said. “I’m always going to say yes, as anything that’s going to help any individual get on the property ladder is always going to be a benefit in the longer term.”

However, he isn’t gung-ho on the matter, and is mindful of the problems that arose with 100 per cent products. He suggested using energy-efficient homes to iron out some of those issues. “For example, [regarding] sustainable homes or EPCs, what would be really useful is if more homes were built that had an A or a B [rating].

If lenders were going to encourage developers but also encourage different types of products and more sustainable homes with better EPC, your household bills typically would be less. Things along those lines, I think, would be really useful.”

Kirk is also in favour of seeing 100 per cent mortgages return to prominence. His analysis centred on the wellworn issue of buyers being able to afford the monthly payments as they often pay more per month in rent but don’t have the ability to save a large enough deposit. He thinks support is needed outside of the private sector.

“What I’d like to see is whether lenders are finding a way to help customers in that situation – and if lenders are doing it, the government should be doing it as well, and there needs to be more action there to help those who are clearly able to service a mortgage but aren’t able to save for that deposit,” he said.

Thompson is encountering that same issue but at another stage of the process, as all her clients are in later life. They often step in to help their younger relatives overcome the tricky down payment hurdle.

“We’re seeing a lot of gifting for deposit purposes, giving to grandchildren and to children, to try to get [them] on the property ladder,” she said. “From a personal opinion, on the 100 per cent LTVs, we still have people suffering from the last time we did that, so it does feel like that is a risky way to go.”

Sleigh is more firmly against 100 per cent LTV,

Mortgage Insider Podcast Property market updates.

IBIM11236-BAR MI-Press-strips-mixed-v3.indd 4

www.mortgageintroducer.com

25/05/2022 09:04

JUNE 2022 MORTGAGE INTRODUCER

35

ROUND TABLE

MARKET although he believes it could have a role to play in limited circumstances. “Maybe – and this could be controversial – just for first-time buyers, as they typically stay in their home for five or 10 years,” he said. “Lenders could consider reintroducing interest-only for a short period to get them through the difficulties of their first home and the current high cost of living.”

The major condition for that scheme, however, is educating buyers on the complexity of their mortgage so they don’t misunderstand what they have agreed to. He said, “[It could work] as long as all parties, and particularly the client, are aware of the risk of interestonly, which years ago they weren’t, and they know at some point it will have to be changed to repayment.”

Calder believes 100 per cent products can make some buyers complacent. “The only person taking a risk is the lender, not the customer,” he said. He has seen clients apply for mortgages while displaying spending habits that did not align with their goal of buying a property.

He added: “There is a bit of that commitment to wanting to get on the property ladder as well and finding the right solutions. It could be different, such as part of your mortgage is on 40 years, but part is only on 20 years, so you accelerate your equity growth because you’re building more equity into a sub-loan in the mortgage. It’s about how you construct it differently as opposed to defaulting to, ‘Let’s just lend to you at 100 per cent of the value over the next 40 years.’”

Calder said that, from a lender’s viewpoint, it would make a big difference if first-time buyers were more educated on what they needed when they approached a lender. This would apply to things like preparing their payslips, maintaining good credit, and having a handle on their budget. He believes there is not enough appreciation of the fact that the homebuying process doesn’t begin by sitting down with a broker. It actually begins years earlier with self-preparation.

Sleigh backed up those sentiments. “That’s something I completely agree with and [that] maybe should even be incorporated into the school curriculum in the last year of school,” he said. “It’s such a big decision to buy a house and finance it, and when you leave school, you’ve got no idea.”

WORDS OF WISDOM It’s not just buyers and sellers who can benefit from sharpening their minds or approach. Brokers also can take advantage of the changing landscape to maximise their performance. Our panel of experts was happy to

Mortgage Insider Podcast To listen, search for ‘Mortgage Insider’ wherever you get your podcasts.

IBIM11236-BAR MI-Press-strips-mixed-v3.indd 5

36

MORTGAGE INTRODUCER JUNE 2022

“Rounding is the bane of a lender.

If you think someone earns £25,000 but they actually earn £24,450, that’s not £25,000.

If their council tax is £210, don’t make it £200” CRAIG CALDER suggest ways in which brokers could be more effective.

For Thompson it was simple. “Explore all options,” she said. “There’s so many variations on mortgages, including lifetime mortgages, and the options that are available to clients now in the later-life space are vast.”

Kirk wants to see brokers take things a stage further and keep hold of the reins. “Don’t stop at the mortgage; take control of the conveyancing to provide peace of mind to the customer and much-needed control for the broker,” he said.

Calder would like to see clarity. “Rounding is the bane of a lender,” he said. “If you think someone earns £25,000 but they actually earn £24,450, that’s not £25,000. If their council tax is £210, don’t make it £200 because you don’t have the time to look it up.”

A similarly practical approach is suggested by Mendes. His first concern focuses on how to deal with clients when they begin the process. “Managing expectations is probably my thing,” he said. Secondly, he encourages brokers to make the application process smoother. “It’s about preparing the client beforehand for what’s needed – some of the brokers don’t prepare their clients enough to get payslips or bank slips, especially first-time buyers, because if a rate does change you get very little notice, maybe only a day, and then going to a client to get everything straightaway doesn’t look good from a service point of view,” he said.

Industry veteran Sleigh, who has seen it all, wants brokers to be ready to go beyond their professional expectations, as buying a home can involve a roller coaster of feelings for many people and their families.

He said, “Be patient. Explore all of the options, [pay] attention to detail, and just be as helpful as you can.

Sometimes you are an emotional shoulder to cry on, not just a broker, so you’ve just got to help [clients] in every area.” M I

Make money work for you

25/05/2022 09:04

www.mortgageintroducer.com

Mortgage Insider Podcast Every episode brings you the insight and analysis you need to successfully navigate the market.

To listen, search for ‘Mortgage Insider’ wherever you get your podcasts or scan below.

Make money work for you

COVER

EPC

Mortgage distributors bid to up the ante on climate change Newly formed advisory group urges closer co-operation

T

he mortgage sector must come together to tackle climate change and add its voice to environmental policies affecting the housing industry, according to one of the prime movers behind a newly formed group.

Three of the UK’s biggest mortgage distributors – Legal & General, Sesame Bankhall Group and SimplyBiz Mortgages – last month announced a new collaborative venture called the Mortgage Climate Action Group. The group’s aim is to interpret new climate change legislation and “provide guidance and practical help” for industry advisers to ensure “they are well equipped to support UK consumers”.

Kevin Roberts, the director of Legal & General Mortgage Club, said in a statement that the mortgage market had a role to play in tackling global warming but the industry also needed to understand the impact “that any changes, from legislation to lending, could have on the sector”.

He said: “We believe that collaboration will be key

38

MORTGAGE INTRODUCER JUNE 2022

to addressing this hugely important issue. We have already been working closely with lenders and will soon be able to deliver educational content, available as structured CPD pieces, centred on supporting the advice journey.

“But our aims extend beyond sharing practical guidance alone, and we are committed to ensuring advisers’ interests are represented among various government and trade bodies, while helping intermediary businesses develop their own sustain­ ability guidelines.”

The three mortgage distributors, which reportedly accounted for more than £169bn worth of gross lending in 2021, are urging others across the industry to support the initiative. So far, they have already reportedly begun working with lenders and the Association of Mortgage Intermediaries (AMI).

According to the latest figures from the Department for Business, Energy and Industrial Strategy, the residential sector accounts for almost 21 per cent of the www.mortgageintroducer.com

COVER

EPC

country’s CO2 emissions, while the Office for National Statistics reports that fewer than half of homes in England and Wales are rated EPC ‘C’ or higher.

Speaking to Mortgage Introducer, Roberts gave more details about his reasons for starting the group.

He said: “Everybody’s fighting for ‘their’ club, but at some point we’ve got to come together in a bigger format. There’s an opportunity here to show the market, the government and advisers that there’s a need to collaborate. People want to put their club shirt to one side and put their country shirt on.”

Asked what he hoped the club would achieve in practical terms, he said: “It can be a place for a regulator or a government … to speak to an industry – we can influence and be influenced.

“Ultimately, what we’re trying to do is to advise, and we can condense that into some simple steps. For example, talking to your clients about EPC ratings.

If you’re locking in a buy-to-let for five years, with regulations coming in it may change, so what position would your rental property be in in five years?

“We can be influencing software providers. Do we start having EPC ratings or sourcing systems on resource tools? It’s a place that can start influencing … driving the agenda.”

In a statement, the group also said that policies to tackle climate change had the potential “to make mortgages less accessible or even more expensive for some borrowers in the UK”. In that regard, Roberts said there was concern about the “unintended consequences” of environmentally friendly policies.

He said: “(People are getting) stuck in properties that are slowly going down in value and can’t move because of their EPC rating. Let’s take a step back and not have knee-jerk, quick-fire policies or regulations.”

He cited London and the difficulties of providing charging points or solar panels in flats and old Victorian properties as examples, adding that “we’re not tackling the issue if we’re just giving discounts for mortgages for people with A to C”.

He said the government had a role to play and compared the way it had promoted the switch over to electric cars as a positive example and one to follow.

“If you look at electric cars, they are heavily incentivised from a tax perspective, and that has encouraged people to really embrace EVs, so we see those getting more and more popular. Not everyone who drives an electric car is doing it because it’s a green thing – they’re doing it because it is (also) a positive financial decision,” Roberts said. www.mortgageintroducer.com

Kevin Roberts

“How can we do that for housing? There’s various tax systems – stamp duty … what about inheritance tax if a property’s sold? There’s a whole taxation system out there that could be used for incentivising this in the future.”

Roberts suggested that stimulating demand could have a positive knock-on effect and help to build “positive momentum” and “influence upwards as an industry”.

In a separate WWF study, the NGO estimated that more than 27 per cent of the UK’s CO2 emissions came from the residential sector, mostly caused by outmoded space heating, household appliances and water heating systems.

The UK government’s own Climate Change Bill contains a legally binding economy-wide target to reduce CO2 emissions by at least 60 per cent on 1990 levels by 2050.

According to the Climate Change Committee, the government’s official advisory body (Sixth Carbon Budget report, 2020), Britain’s homes accounted for 66 million tonnes of direct emissions in 2019 as a result of burning gas, oil, coal, and other fuels to provide heating and hot water. M I JUNE 2022 MORTGAGE INTRODUCER

39

INTERVIEW

ECONVEYANCER

Broker-conveyancer relations: How can they be improved?

Karen Rodrigues Director of sales, eConveyancer

A

sk a mortgage broker for their view of conveyancing, and the response will likely be along the lines of ‘necessary evil,’” says Karen Rodrigues, director of sales, eConveyancer.

Rodrigues believes that advisers understand the crucial importance of getting the legal side right with a property transaction but have often been burned by too many cases in which the process was protracted to the point where a deal was put at risk.

“Unfortunately, as an industry, we do not do a good enough job of highlighting to brokers the importance of being selective in which conveyancing partners to work with, and the ways that quality conveyancing firms can help brokers to secure repeat business from their clients,” she said.

The primary issue for any broker is the actual conveyancing work, Rodrigues explained.

She said advisers wanted to be able to recommend firms that they trusted – that could not only be relied upon to be vigilant regarding the details of a transaction, but could also help push a deal towards completion in a timely manner.

“It can be tempting to stick with just one or two local conveyancers who are perhaps something of a jack of all trades when it comes to property,” Rodrigues said.

However, the reality is that the legal tasks involved in property transactions can vary significantly based on the buyer.

Rodrigues said there was a big difference between a first-time buyer

40

MORTGAGE INTRODUCER JUNE 2022

purchasing a new-build flat and an investor picking up commercial premises that will be converted into homes.

“A decent panel manager will have a range of conveyancing firms for you and your clients to choose from, each of whom may have a particular area of specialisation,” she added.

According to Rodrigues, expertise counts in these more complicated cases, and this could make a real difference to timescales for completion.

She believes that having proper support on hand is crucial, too.

There would always be cases where the intermediary, or indeed the client, needed extra support.

Rodrigues explained that the right panel manager could educate not only the broker but also the client on the conveyancing journey.

“At eConveyancer, for example, we have designed and produced several consumer-facing guides that break down the legal jargon and provide a step-by-step guide on what will take place during a case,” she said.

“We also offer regular training sessions with several mortgage networks and clubs to help boost broker understanding.”

Rodrigues said that while the legal side was the bread and butter of any conveyancing partner, it was important for brokers to bear in mind that there was more to a good panel manager than that.

“In fact, picking the right partner can help brokers offer their clients a more rounded service,” she said.

Looking at examples, Rodrigues said eConveyancer had built a range of ancillary services that brokers could access for their clients beyond the main conveyancing task.

“Some of these are directly related to the move-in question, such as Homebuyer Protection from Surewise, which helps protect client

money in the event that a transaction falls through, but others are not,” Rodrigues said.

“Brokers can refer their clients to an online will-writing service, for example.”

She said these additional features meant that brokers could go the extra mile for their clients and open up future avenues for working together.

“If clients know their broker can help them with a will, they will likely come back to them for help with getting protection in place,” Rodrigues said.

She believes this not only secures a stronger relationship with the client but also provides additional revenue streams for the broker.

“That’s why when brokers consider the conveyancing firms they might want to work with, they need to look beyond the headline offering and include those ancillary services that could boost their business over the long term,” Rodrigues said.

Finally, she noted that it was worth remembering that clients’ experience with the conveyancer would often have a bearing on their ongoing relationship with the broker.

If things go poorly – for example, the conveyancer is slow or makes mistakes – then it is the broker who introduced the client to that legal firm who may bear the brunt.

However, when things go well, and the conveyancer helps conclude the legal side of a transaction swiftly, then it is ultimately the broker who benefits, as a satisfied client is more likely to provide repeat business, according to Rodrigues.

“Working with the right conveyancing partner can make a real difference to the prospects of any broker, but it is up to the industry at large to do a better job of highlighting to advisers how we can support them and their clients,” she concluded. M I www.mortgageintroducer.com

INTERVIEW

SKIPTON BUILDING SOCIETY

The more support, the easier the journey Rachael Hunnisett National accounts and new build lead, Skipton Building Society

S

kipton Building Society has launched a helpdesk aimed at supporting brokers with complex enquiries about the new build market.

The ‘New Build helpdesk’ initiative is in response to feedback about the need for broker education on the sector. They will have access to a designated team who will be on hand to answer complex questions about new build cases or, alternatively, pass enquiries on to one of four underwriters.

Rachael Hunnisett, Skipton’s national accounts and new build lead, told Mortgage Introducer that the society also wanted to help first-time buyers specifically.

“First-time buyers in general are a segment that we really want to support, and I know from developers that a huge portion of new build homes are sold to them,” she said.

Skipton’s announcement earlier this month comes at a time when first-time homebuyers are facing major challenges, including all-time high property prices and a rising interest rate environment.

Meanwhile, house prices have rocketed, with a typical home now 20 per cent more expensive than in February 2020.

Hunnisett said, “As an industry we should consider that housing has to be accessible. We’ve got creative solutions to look at how we can really think outside the box to get more people on the market.”

She said the helpdesk would provide crucial support to brokers, who face a “cascade” of complex information about construction types.

“We’re seeing loads of different construction types at the moment and lots of different innovation in terms of shared ownership, different schemes, clauses, and section 106 restrictions that refer to only being able to buy property if you’ve got a local connection.”

Skipton said that it had so far received 1,781 new-build applications this year, of which 961 (53 per cent) had been earmarked for first-time buyers.

Skipton is reputedly the UK’s fourth-largest building society, with more than one million customers, £29.0bn of assets and a network of 88 branches. M I

DA

Take your business to new heights Bob Scott

Managing Director SCAN ME

www.mortgageintroducer.com

DA

Join the Club that’s really going places Scan the QR code to download our brochure, or give us a call on 01564 732 748 JUNE 2022 MORTGAGE INTRODUCER

41

LOAN INTRODUCER

SECOND CHARGE

Why apps will be the next big thing for second charges Matt Meecham Chief digital officer, Evolution Money

I

f you are anything like me, the chances are you have downloaded an app – or several – over the past month or so. Whether it be to order your Saturday night takeaway, check the weather, or entertain the kids, there seems to be an app for almost any purpose.

Astonishingly, figures from app data agency Sensor Tower show that worldwide, app users spent the equivalent of 53 million years using the top 500 apps during the third quarter of 2021 alone. Its research also shows that, since the start of 2019, no category has seen faster download growth than finance apps.

This is perhaps not surprising given the rise in online banking in recent years. According to comparison site Finder.com, 93 per cent of the UK adult population will be using some form of online banking by the end of 2022.

Furthermore, as of January 2022, over a quarter – 27 per cent – of British adults were customers of a digital-only bank, the equivalent of 14 million people. Finder expects this figure to climb to 19 million by the end of this year.

Digital banking is no longer a niche – at least not to your clients, who are no doubt well informed and practised when it comes to online banking, downloading, and using apps. It’s time we saw this crossover into the mortgage and second-charge space also.

We have seen some slightly chaotic scenes in the first-charge mortgage market over the last few months

42

MORTGAGE INTRODUCER JUNE 2022

as some lenders have struggled to cope with the influx of enquiries and to maintain service levels.

Numerous hours have been wasted by borrowers, advisers, and lenders manually inputting and chasing borrower details that could easily be collected digitally.

There is no doubt that lockdown accelerated the use of fintech in both the first- and second-charge mortgage sectors, but it’s important that now, as the pandemic recedes, we keep this moving at a fast pace and push the digital journey along.

Figures from the Finance & Leasing www.mortgageintroducer.com

LOAN INTRODUCER

SECOND CHARGE Association show new business volumes in the second-charge mortgage market in March had reached their highest level since September 2008.

With both the first- and second-charge mortgage markets expected to remain busy for the foreseeable future, it is vital we meet this demand with a secure, efficient, and speedy service.

For certain borrowers, a second-charge mortgage can be a speedier option compared to a remortgage, and the use of financial apps within the second-charge market is set to accelerate this further. There is strong demand from clients for a more digitalised experience, and this is something we know first-hand with the recent launch of our Evolution Money app.

During the initial stages of our launch, we gave borrowers the option to upload three months of bank statements or use open banking. The uptake was greater than expected, with over 90 per cent of borrowers opting to go down the open banking route.

Those borrowers who downloaded the app also saw the time it took to release their funds from the initial referral stage decrease by over two days.

Over time we expect to double this to four days for our digital and hotkey broker partners.

Enabling borrowers to download the app not only speeds up their application but also significantly reduces the workload for advisers.

Digital features such as the e-signing of documents, digital identity verification, document collection and online status updates all make for a safe, secure, and smoother client experience.

Second-charge customers can at times be more complex in their lending needs, or their income may be comprised of non-standard features. They might be self-employed or have some credit blips, or their financial profile may include various threads, such as bank accounts or loans.

Using open banking through the app means we can harness all of an applicant’s credit history and data together in one place. The automation of the income and affordability assessment also allows for a deeper borrower fact-find and ultimately leads to a more informed responsible lending decision.

There is clear demand and enthusiasm from borrowers for open banking – and if we as an industry are not attuned to this, we risk losing out.

As we head further into 2022 with both the first- and second-charge mortgage markets continuing to move at a fast pace, the service that advisers offer their clients will be more important than ever. There will also be an expectation from clients that, just as in most other aspects of their lives, their second-charge mortgage will be done online via apps using a digital journey. It’s up to us to meet this expectation and provide the tools to allow this to be accomplished. M I www.mortgageintroducer.com

JUNE 2022 MORTGAGE INTRODUCER

43

LOAN INTRODUCER

SECOND CHARGE

Rising rates will highlight capital-raising methods Tony Marshall Managing director, Equifinance

M

uch is being written about the volumes of fixed-rate first charge mortgages that are going to expire this year, just at a time when interest rates are going up, along with the likelihood that the base rate could reach 2.5 per cent by the end of the year. Naturally, much attention from the adviser community will be focussed on helping clients access the next best alternatives as the door begins to close on ultra-low rates.

All those who have had personal foresight or taken professional advice and have just started or are in the process of enjoying a fixed-rate mortgage are going to be feeling pretty good about their choices around about now.

As the change in rates and increases in the cost of living take their toll on household budgets, one of the less thought-through consequences of rate rises will be those felt by fixed-rate customers wanting to raise capital for home improvements, for example.

If rates continue to rise this year, the old default choice of remortgaging will become less and less attractive to customers. Why? When it comes to the timing of a remortgage, existing fixed rates are unlikely to be matched by their successors as the base rate rises. So the regulator will understandably begin to question recommendations advising customers to give up a particularly attractive rate in order to raise capital by replacing it with an inferior product via a remortgage.

Of course, there are other reasons why a remortgage might not be suitable, but I believe that those who have managed to lock in a fixed rate

44

MORTGAGE INTRODUCER JUNE 2022

before the rises we are now seeing will not want to face the upheaval of leaving their legacy fixed rate to pay a higher price on a remortgage.

With the next few years likely to see more of a return to rate volatility, which is a phenomenon that the newer generation of advisers and customers will not have experienced before, there is still time for advisers to reconsider their advice to capitalraising customers.

This issue makes it even more important that compliance departments pay particular attention to remortgage cases and their suitability, especially if the BoE base rate continues to rise and the gap between historic fixed rates and whatever is on offer in the future widens.

The reasons to consider a secondcharge solution when clients wish to raise capital are already well documented, but the likelihood of an increasing gap between old and new rates is a clear and present danger to those advisers who already lean heavily on a remortgage strategy.

Consumer Duty guidelines from the FCA coming under greater official scrutiny, especially those around transaction data, are going to make advice justification more transparent and make it more difficult to hide.

Yes, I am writing this as the head of a second charge lender, so I do

have more than a passing interest in promoting a second charge option.

However, if rates continue to go north, it stands to reason that brokers should be reassessing their reasons for blindly adopting the usual remortgage route without weighing up an alternative before making their recommendations.

For those brokers who have never gone outside the remortgage route or aren’t even licensed to advise on second charge mortgages, I think it is time that they consider changing their status or engaging with a wholeof-market packager or distributor to give them the flexibility to at least do meaningful comparisons, so customers (and compliance departments!) can see the level of consideration that has been given before a final recommendation is made.

The lending industry has come a long way in moving to a position where second charge mortgages are no longer beyond consideration.

Lending figures clearly demonstrate that, post-COVID particularly, the market, while dwarfed by its first charge cousin, is winning new friends every day.

The strong likelihood of rising rates over the next 12 to 18 months is likely to see a further shift in attitudes toward second charge solutions for capital raising. I am sure that the regulator will be taking a keen interest. M I www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER

DEVELOPMENT

Northern Irish SME developers urgently need more funding Roxana MohammadianMolina Chief strategy officer, Blend Network

S

pecialist development finance lender Blend Network recently announced the opening of a new Northern Ireland office in Belfast, responding to the rising demand for specialist finance solutions from local house builders and SME developers.

Roxana Mohammadian-Molina, chief strategy officer at Blend, argues that much of Northern Ireland’s lack of housing supply is due to the gap in the supply of finance for housebuilders and SME property developers.

The price of an average house in Northern Ireland has increased by nearly £28,000 since the start of the pandemic, equivalent to annual average earnings in the region. According to data from the Nationwide House Price Index, average Northern Irish house prices saw the second-fastest increase of all

www.mortgageintroducer.com

the UK regions and nations last year (+12 per cent YoY), higher than the average annual price increase in the UK and more than double that of London. In 2019, the year before the pandemic set off sharp house price rises across all UK regions, Northern Ireland saw the fastest growth in house prices (+3.2 per cent), more than six times the growth in the UK (+0.5 per cent) at a time when the average house price in London was declining (-2 per cent).

While all UK regions have witnessed dramatic house price movements over the past two years due to a combination of the stamp duty holiday and the so-called race for space during and after the peak of COVID-19, the reasons behind Northern Ireland’s price activity appear to be much more complex. The constant lack of supply and the consequent backlog of available new private and social homes across the region have characterised the Northern Irish housing market for well over a decade since many lenders exited the market in the aftermath of the 2008 global financial crisis

that left many small house builders and SME property developers badly wounded. Land and Property Services figures show that between 2005 and 2007, 13,000 new residential units per year were being completed. Yet that number dropped dramatically in the years following the financial crisis, to a low of just 5,410 units in 2013 – when estimates from the Construction Employers Federation show a need for 9,000 homes to be constructed per annum in order to meet current demand. Land and Property Services figures on new dwelling completions suggest that in the decade between 2008 and 2019, a deficit of approximately 27,000 new homes was accumulated, the equivalent of three years’ worth of housebuilding targets. The pandemic has further affected housing delivery; in the nine months to September last year, only 5,560 units were completed – down from 7,644 units in 2018 and just over a third of the figure in 2006 (14,098 units).

Northern Ireland’s chronic lack of housing supply is tightly interlinked with the lack of readily available funding for small house builders and SME property developers. The results of British Business Bank’s SME Finance Survey 2020 offer further evidence of an existing bottleneck in funding for SMEs. Respondents to the survey felt that the top two obstacles to SMEs’ demand for finance were the lack of awareness of the finance options available to them (72 per cent), followed by access to the supply of finance (57 per cent). Overall, 83 per cent agreed there was a gap in the supply of finance for SMEs, whatever their stage of growth.

If we are serious about tackling the pressing housing crisis in Northern Ireland, we need to ensure that more funding is available for SME property developers to deliver more homes. M I JUNE 2022 MORTGAGE INTRODUCER

45

SPECIALIST FINANCE INTRODUCER

EQUITY RELEASE

Doing equity release right Stuart Wilson CEO, Air Group

L

ast month, the Financial Services Consumer Panel published a qualitative research paper comprised of interviews with 45 equity release market participants to ascertain their view on the process leading up to an equity release sale, and their feelings after it.

When such publications are released, there can be a natural tendency to be somewhat defensive about the findings, or to try to dismiss them if they do not chime with what we believe the industry is providing or with our own experience with clients.

However, my view is slightly different. I feel that the better we can understand the motives of customers, and review whether the outcome they received and the advice process they went through were good for them, the more we should be able to shape advice to deliver more positive outcomes.

And these surveys should also flag potential areas of future concern, which could be headed off at the pass early on, and perhaps ensure that later on down the line, the customer doesn’t feel any remorse or regret.

Compared to the thousands who take out equity release each year, the paper used what was admittedly a very small sample consisting of only 28 actual customers – some of whom said they took out retirement interestonly mortgages – as well as 13 family members and four people who had considered these products. That said, by drilling down, particularly into those pre- and post-completion feelings, I think there is some good feedback to be taken on board.

Pre-sale, the research appears to

46

MORTGAGE INTRODUCER JUNE 2022

show that, while there was a general level of understanding about equity release, participants didn’t necessarily know how it worked in practice, or what it would ultimately mean, for example, around ongoing interest payments, compound interest, and the like.

This brings home how important it is for advisers to couch these concepts in terms that customers can understand, because if understanding comes only after the sale has been completed, then the chance of dissatisfaction will be higher. This also holds for the potential impact on equity, inheritance, etc.

The other important point that came through to me, especially in terms of the post-completion reaction, was the need for review time to be built into the process – that is, giving clients the chance to breathe between the advice provided and their decision, and giving them time to discuss things with you and anyone else they might wish to.

There is a natural buffer period that exists between the time the case is written and when it is issued, and it is perhaps during that period that the adviser might want to check in with customers about their intent, so that they do not feel they are already locked into something they can’t walk away from.

Of course, there will be those who want to have the money as soon as possible, but in a sense, it is perhaps these clients who require that breathing space more than others.

I wonder sometimes if we might be able to correlate any customer regret levels with the desire those customers had to get the money quickly and the time they took (or did not take) to decide on the equity release/later life product.

Advisers will often get a sense from these sorts of clients who want everything done yesterday, and it is probably worthwhile slowing them

down as much as possible, just to ensure they are absolutely clear about what they are signing up for and the responsibilities that come with that.

Again, this need to complete quickly might also sometimes be a red flag to advisers, especially if it looks like, for example, a family member in the background might appear to be having too much influence over the clients.

Taking the time to speak to them outside that family member’s sphere of influence could be vital in understanding whether the clients’ motives are genuinely their own or they are being pressurised into equity release/later-life lending.

I know many advisers do conduct a post-completion interview with clients, and will keep in contact with them, but not all will. The research appears to suggest a norm of limited contact after products complete, and both advisers and providers should perhaps look at doing more in this area.

With the concept of remortgaging or rebroking equity release plans gradually gaining consumer confidence, this is certainly something that we as an industry need to consider.

It’s plain to see that the lower the level of understanding about the product, the choices they have, their responsibilities, etc, the higher the chance of customers being dissatisfied after completion. We may well think we are being crystal clear in our customer dealings and that there can be no doubt the client is fully clued in about everything you have discussed and what they are signing up for, but that isn’t necessarily the case.

This research appears to show that even if you think you have covered this to the nth degree, there is still a good chance the understanding may not be there.

Advisers may rightly argue that they can sometimes do no more in this area, and if the customers don’t understand at a certain point, they may never do.

That is unlikely to wash with a regulator or consumer group, so we need to be careful here, and to build plenty of time into the process to secure their understanding and to ensure we have records of the multiple times information is provided. M I www.mortgageintroducer.com

FEATURE

WORKPLACE CULTURE

Why working culture needs to change Colin D. Ellis Culture change specialist; founder of Culture Makers Community

C

ulture, or the ‘way we do things around here’, is – and always has been – the biggest determinant of team and organisational success. When times are good, culture is invisible, save for the smiles on people’s faces, the dedication with which they approach their work, their determination to get the best out of each other, and

www.mortgageintroducer.com

how they collectively celebrate their successes. When times are bad, culture shows itself everywhere.

O.C. Tanner’s 2021 Global Culture Report found that stagnant cultures – i.e. those in which employees were disengaged and demonstrated poor behaviours – were 10 times more likely to be negatively affected in a crisis, and many organisations are still suffering the effects that the pandemic has wrought on the way they operate.

Conversely, the organisations that thrived during the pandemic were the ones that recognised that the way work was done had changed significantly, and as a result the micro

experiences between staff would have to change too. They focused not only on the wellbeing of staff but also the interactions between them.

They recognised the fear and anxiety that people felt, and created a space where it was both OK to talk about it and still bring their most productive selves to work.

In short, these organisations focused less on the tactical day-to-day of work and took a proactive approach to building emotional connections between people and redefining the culture they needed to be successful.

If you’re moving to a hybrid working model, you need to do that too.

Cultures that were previously designed for a model in which people were interacting face-to-face when located in the same space are no longer applicable. For hybrid working to be effective, the working culture has to be redesigned to suit this model.

When redefining the culture required

JUNE 2021 MORTGAGE INTRODUCER

47

FEATURE

WORKPLACE CULTURE

“Too many organisations still leave the definition of working culture to chance, or hope that it ‘naturally’ evolves to suit the new working conditions. It almost never does” for hybrid working, organisations need to consider the following.

Personality and communication Relationships are critical to productive work in a hybrid world, and this starts with people understanding themselves.

The pandemic has affected everyone in different ways, so it’s important to recognize this and for people to re-evaluate who they are now, and how this has affected their purpose in life. Once they have that knowledge, empathy for others becomes easier, and communication is strong.

Vision One report at the end of 2020 found that only 30 per cent of organisations surveyed felt they had clear consensus on their new vision post-pandemic,

48

MORTGAGE INTRODUCER JUNE 2022

which led to a detrimental impact on morale. The vision is an aspirational statement of what the culture is striving to achieve, and it should provide excitement around what’s achievable in the next 12 months, not the goal pre-pandemic.

Values Values should provide emotional bonds and be lived in plain sight in every interaction between staff members. These may have changed during the pandemic. One organisation I worked with added ‘Vulnerability increases our humanity’ to demonstrate the increase in transparency required to be successful in its hybrid working.

Behaviour By far the biggest impact on culture during the pandemic was seen in the behaviours of employees. Fear, anxiety, confusion, and anger have understandably undermined productive work at various stages during 2020 and 2021. Redefining the behavioural expectations of staff will increase responsibility and accountability and ensure that all staff understand where their opportunities for improvement and growth lie.

Collaboration Implementing collaboration tools won’t improve the way people interact unless there is agreement as to how people will use them and respect each other’s need for time to do productive work. Technology should support collaboration, not get in the way of it.

Innovation Microsoft is one organisation that saw a reduction in innovation as a result of not moving to a hybrid working culture. Tools such as Gather can be used to create casual interactions between staff that give rise to ideas, or hold online hackathons to generate a pipeline of creativity.

Too many organisations still leave the definition of working culture to chance, or else hope that it ‘naturally’ evolves to suit the new working conditions. It almost never does, and senior managers will seek to blame the new ways of working rather than their underinvestment in cultural evolution.

Defining the culture required to meet the challenges or opportunities that hybrid work will bring needs to be done as early as possible. The world has changed, so the way work gets done needs to evolve to meet that. M I www.mortgageintroducer.com

Miles Wallace The Mortgage Branch, Cheltenham

Let’s make this easy, Miles

Specialist finance doesn’t need to be complicated. easysource+ is the new complete specialist lending sourcing and case management solution for mortgage brokers and IFAs. New features to be rolled out in phases over the coming months include end-end secure video, e-signatures and ID verification systems as well as an app for when you’re on the move. The accuracy of sourcing in this way can save huge amounts of time compared to independent research. Coming soon, find out more and register your interest at brightstarhub.co.uk/easysource

Sponsored by

Re-mortgage.

Re-furbish.

Re-vive.

With our remortgages, you could help your customers do some home improvements, build an extension or renew their furnishings.

That’s because our remortgages are: • free of legal and valuation fees for a standard remortgage up to £2m • available up to 90% LTV for standard remortgages • available with offers valid for 6 months • quick to complete thanks to our streamlined processing For more information go to intermediary.natwest.com or log on to LiveTALK.

ONLY FOR USE BY MORTGAGE INTERMEDIARIES