EDI review

How education can support EDI in the mortgage industry

Gordon Reid

Business and development manager, London Institute of Banking & Finance

In 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 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

Bridging rates fall to new lows as volumes rise

Raphael Benggio

Head of regulated underwriting, MT Finance

The 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 DRIVES MARKET

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