Mortgage Introducer November 2022

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November 2022

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November 2022

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EDITORIAL

COMMENT Managing Editor Paul Lucas paul.lucas@keymedia.com Editor Simon Meadows simon.meadows@keymedia.com News Editor Jake Carter jake.carter@keymedia.com News Editor Richard Torne richard.torne@keymedia.com 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 Content Editor Kel Pero Production Manager Monica Lalisan Production Coordinators Loiza Razon, Kat Guzman Designer Khaye Cortez Head of Marketing Robyn Ashman robyn.ashman@keymedia.com

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A resilient industry, whatever the weather

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hese are stormy times indeed for the UK economy and, as a knock-on effect, for the mortgage industry, too.

Which products are in, which are out? What rates are being offered, and for how long? And, crucially, will homeowners, both long-standing and new, be able to afford to keep a roof over their heads if inflation and interest rates rise still farther?

There are questions aplenty as we all try to determine what this means for our pocket, be it personally or in our businesses, and not all of those questions can necessarily be answered immediately or with certainty. There are plenty of opinions flying around – some expert, some less so – but few of us are immune to the implications of an unsettled economy, regardless of our personal wealth.

The temptation in a downturn is to focus on the doom and gloom. Yet, from the discussions we’ve had with numerous mortgage advisors over the past few weeks, there is remarkable optimism about the way forward. Yes, there’s a grown-up acknowledgement that these are challenging times and that we’re seeing fluctuations in the

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CRITERIA AND UNDERWRITING

Individual

CASE ASSESSMENT

market – but there’s positivity, too, that business will remain strong, with a steely resolve to ensure that it does.

This says much about the resilience and tenacity of the industry. It’s survived in good times and bad, through generations of brokers, and it is adept at taking the rough with the smooth and holding its nerve until a storm passes.

As with most things in life, positivity wins. Think positively and you will find that positive things happen – usually. We have been here before and we will likely be here again. These things are cyclical, after all.

Politicians wrestling with an uncertain economy and markets reacting adversely is nothing new.

As legendary former Prime Minister Harold Macmillan said memorably, when asked what the most troubling problem of his term in office was: “Events, dear boy, events.” Events come, events go, of course, but people still need homes, and they will continue to do so.

Simon Meadows

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NOVEMBER 2022 MORTGAGE INTRODUCER

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MAGAZINE

WHAT’S INSIDE

Contents 4 10 15 16 18 20 22 27 30 32

Market review Advice review London review Recruitment review Technology review Buy-to-let review Protection review General Insurance review Equity Release review Conveyancing review

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PIVOT!

34 Cover: Remortgaging Borrowers are buffeted 37 Special report: Five-star lenders Mortgage Introducer shares the highest-rated lender partners in key areas

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44 Interview: Women in the sector More women entering the mortgage sector

Legacy planning

54

46 Interview: Lean into marketing Don’t disappear in tough times

Look ahead

50 Loan Introducer The latest from the secondcharge market 54 Specialist Finance Introducer Focus on the buy-to-let specialist market

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Special report

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MORTGAGE INTRODUCER NOVEMBER 2022

www.mortgageintroducer.com

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Diversity and inclusion: it’s good to talk Craig Calder director of mortgages, Barclays

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ctober marks Black History Month in the UK, and this year’s theme, ‘Time for change: action not words,’ represents a strong message that should resonate with us all.

Here at Barclays, one of our principal aims is to make every one of our colleagues feel comfortable being themselves at work. It’s central to our culture, and we nurture it through activities and initiatives, and building networks for colleagues to connect.

Diversity and inclusion should be key words in any business, and it’s a huge positive to see such progressive strides being made across the mortgage market in recent times. However, this is not a tick-box exercise – it’s a movement that should be embedded within company cultures for a number of reasons.

Looking at this in a business and commercial sense, diversity and inclusion can open the doors to increased profitability, creativity, stronger governance, and better problem-solving, because employees from diverse backgrounds bring more of themselves in terms of new ideas, perspectives, and experience.

Having a diverse workforce makes organisations more resilient and more effective, and they tend to outperform less-diverse organisations.

As an industry, I think it’s fair to say that – despite significant progress being made – we are still not as diverse or inclusive as we could or should be, and our progress must be tempered by the knowledge that there is still some way to go. This was highlighted in

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AMI’s second Viewpoint report back in October 2021, which found there was definitely an “appetite for change,” with 82 per cent of respondents saying they felt diversity and inclusion were important and just five per cent saying they didn’t think it was important.

However, those surveyed, especially from minority groups, also reported discrimination in the workplace and at industry events, raising concerns around culture and leadership. More than 40 per cent of respondents said the mortgage industry attracted a representative workforce. This falls among women, LGBTQ+, and ethnic minorities to 35 per cent for women and 36 per cent respectively for the latter groups. When employees think their organisation is committed to and supportive of diversity, and they feel included, employees report better business performance in terms of ability to innovate (83 per cent uplift) responsiveness to changing customer needs (31 per cent uplift), and team collaboration (42 per cent uplift).

So what more can be done? Simply asking this question is a great starting point.

Talking and listening are key in attempting to get to grips with these issues. Diversity and inclusion have featured heavily in our Mortgage Insider podcast series, and past episodes – “Diversity and inclusion in broking,” with Sidney Wager and Sophie Lowndes-Toole; and “Diversity: Pride month,” with Nancy Kelley, CEO of Stonewall, and Hannah Bernard, head of business banking at Barclays – have both tackled these topics extensively.

And a more recent episode, “Breaking down barriers,” with Sarah Tucker and Jamie Lewis, co-founders of The Mortgage Mum, was released to coincide with International Women’s Day. All of these are available to listen to online.

As a company, we will continue highlighting such issues whilst

MORTGAGE INTRODUCER NOVEMBER 2022

accepting there are still many knowledge gaps, and curiosity will drive further education. For businesses, it can be as simple as asking themselves the question, “Are we representative of the communities we serve?”

There are many charters and government initiatives that are helping people to take a good, hard look at themselves and their businesses. The Race at Work Charter may be a good starting point for some. This was launched by Business in the Community (BITC) in late 2018, with the aim of tackling ethnic disparities in the workplace.

This charter is composed of five principal calls to action for leaders and organisations across all sectors.

It also outlines that action by employers could boost the UK economy and lead to increased productivity and returns in the workplace, and points out the following.  Race equality in the UK will potentially bring a £24 billion per year boost to the UK economy – 1.3 per cent of GDP, equating to £481 million a week.  Organisations with more diverse teams have 36 per cent better financial returns.  Only one in 16 people at senior levels in the private and public sector are from an ethnic minority background.

In a purely business sense, diversity and inclusion open the door to better recruitment, greater innovation, stronger employee retention, and an enhanced understanding of client demands. These factors are relevant to firms of all shapes and sizes.

Diversity and inclusion may not the easiest topic at times, but we as an industry need to become more comfortable having these conversations in order to continue moving forward and create real change. M I www.mortgageintroducer.com

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Significant shift in regulatory thinking will change perceptions Jerry Mulle MD, Ohpen

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lot has happened since July.

It’s forgivable that, compared to Russia’s war in Ukraine, the energy crisis, the death of the queen, the removal of Boris Johnson, the appointment of Liz Truss as prime minister and accession of Prince Charles as king, the mini budget delivered by Kwasi Kwarteng, and then Kwarteng’s dismissal, financial regulations might not have been top of mind.

Still, the Financial Conduct Authority’s (FCA) confirmation of its new consumer duty regulation, which is set to come in from 31 July next year, giving firms 12 months to develop systems that allow them to deliver against expectations, is pressing.

To recap, the FCA’s new consumer principle requires firms “to act to deliver good outcomes for retail customers.”

In the regulator’s own words, the changes include “cross-cutting rules providing greater clarity on our expectations under the new principle and helping firms interpret the four outcomes” and “rules relating to the four outcomes we want to see under the consumer duty.

“These represent key elements of the firm-consumer relationship which are instrumental in helping to drive good outcomes for customers,” said the paper, published by the regulator in July.

The outcomes to which the incoming consumer principle relate include products and services, price and value, consumer understanding, and consumer support.

The FCA’s announcement stated, “Our rules require firms to consider the

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needs, characteristics, and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey.

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

This is big stuff, too. At first glance, it might not hold a candle to the events of the past eight months, but make no mistake – this is a significant shift in regulatory thinking.

How firms interpret the new rules and, crucially, how they opt to provide evidence of their adherence to them is going to be the single biggest regulatory challenge lenders and, indeed, all regulated firms face over the coming months.

And it is not like there are no other things to worry about at the moment.

Inflation is a nightmare, yes; interest rates and what to do with customers in arrears are hellish to deal with. But protecting yourself against the enforcement action that could be taken against you as a regulated firm if you fail in the new consumer duty is a real and present threat, too.

This is the standard by which firms will be judged when reacting to customers failing to deal with rampant inflation, the loss of a job, or the inability to remortgage at the end of a two-year fixed rate that jumps from 0.89 per cent to five per cent overnight.

Lenders have been told they will be held to account. To reiterate, the rules “require firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey.”

It is standard for the FCA to provide guidance to firms on how to meet regulatory expectations. The guidance relating to these rules conforms to type.

MORTGAGE INTRODUCER NOVEMBER 2022

“Firms will need to understand and evidence whether those outcomes are being met.”

The question is, how?

What are you measuring? When are you measuring it? Why do you think it’s the right thing to measure? And if you can come to a landing on these points, do you have the operational bandwidth and capability to integrate these decisions into processes and models? It all points to a hard time for those unable to make changes easily. I’ve said before how agility in systems is crucial, but every month something new comes along to reinforce the point. If you cannot cope with one set of market or proposition changes, what hope is there of delivering change on multiple fronts?

Of course, the answers to these questions will depend on the service you offer, the products you sell, when you sell them, and to whom. But they are not straightforward to work out, not by a long stretch.

It is not always simple to define financial vulnerability in a stable economy; but these rules do not even restrict the definition of vulnerability to the financial, and we are not in an economy that could be described as stable.

Regardless, regulated firms will be held to account where consumer outcomes are deemed by regulators not to be “good.” Proving your business is not culpable will be imperative.

Setting aside the moral and philosophical breadth of interpretation when it comes to words and ideas such as “good” or “value,” firms must find a way to prepare.

They must also be prepared to flex processes to measure their delivery of these new rules, because expectations will change. Operational excellence and efficiency will come to mean something else, and the ability to flex systems for commercial reasons is as important for regulatory reasons as any others. M I www.mortgageintroducer.com

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The changing nature of efficiency Steve Carruthers business development director, IRESS

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or the past decade, IRESS has carried out annual research with lenders from across the industry to discover how those in operations have evolved their approach to efficient lending over the past year and to take a snapshot of the risks, challenges, and opportunities they see and deal with.

Part of the value we think carrying out this research year in, year out offers is that it plots the course taken by those operating in the mortgage market. Understanding how challenges emerge and how the industry meets them is hugely helpful when it comes to planning.

Last year’s survey was perhaps the most extraordinary we have carried out over the past 10 years, giving unique insight into how lenders dealt with the onset of lockdown and all the challenges that the pandemic brought with it.

This year’s is equally illuminating.

2022’s Mortgage Efficiency Survey includes insight garnered from 37 lenders who took part in a series of detailed research interviews. Affordability assessment, the vital role that brokers play in client selection and application conversion, and investment in technology and digital security were mentioned again and again.

In spite of eye-watering inflation putting such enormous pressure on borrower incomes, most lenders have remained focused on core efficiency improvements designed to improve customer experience, technological efficiency, and digital tools.

Flexibility and adaptability proved critical when the pandemic hit, and are no less crucial today. What these

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terms mean in the here and now changes daily, and it’s this that really comes through when looking back over previous reports.

Take 2021, twelve months after lenders had to pivot their operations overnight to accommodate lockdown rules. They said at the start of the year that, having been forced to adapt, it was extraordinary how much they found they achieved.

What it has shown those managing lender operations is that adapting isn’t something you can do once and be done with it.

The past two years have seen Brexit delivered, a global pandemic, unprecedented emergency public spending to support people and businesses through it, a stamp duty holiday and 95 per cent mortgage guarantee scheme, the launch of the starter homes programme, Russia declaring war on Ukraine, a cold war waged against Europe by starving us of energy supply, inflation scaling 10 per cent, energy support bailout packages, rising interest rates, a new prime minister, the end of Queen Elizabeth II’s 70-year reign, a new king on the throne, and a mini budget from the third chancellor in the Treasury this year – who was promptly sacked and replaced by a fourth.

Markets have been incredibly volatile. The pound is all over the place.

In practice, this means that how we define efficiency has changed constantly. In just the past couple of months alone, the mortgage market has seen how it understands efficiency change again. As the Bank of England (BoE) has raised rates, lenders have had to replace products more swiftly than has been necessary for years. And it’s on the BoE’s timetable – not just in response to competitive ebb and flow on pricing.

In fact, that ebb and flow has become more of a rip tide in today’s market. It’s a race not to be the last best buy standing rather than a jostle to the top. Lenders are

MORTGAGE INTRODUCER NOVEMBER 2022

really struggling in some areas as applications flood in following a competitor’s product withdrawal.

In the past, efficiency has meant tight application packaging, clear and predictable criteria, slick interface with intermediaries and underwriting that speeds up the approval process. These measures still matter, but product design and speed to market are now imperative efficiency measures.

Lenders want to lend, but it’s become harder to control how this is achieved. It is not just base-rate hikes that trigger product overhauls; lenders hiked mortgage rates within days of the chancellor unveiling the government’s growth plan and massive tax cuts for business and high earners.

The pound’s plunge that followed the budget left funding costs reeling.

Swaps spiked; near-term rate expectations and long-term expectations were all over the place.

This has enormous ramifications for lenders’ already fairly skinny margins, and fast and efficient responses are the difference between profit and loss.

How underwriters understand and assess affordability and security value also becomes a moveable feast. An economy at the mercy of so much uncertainty and so much of it out of both government and the BoE’s control makes forward planning almost impossible.

From the perspective of borrowers, applications still must be processed efficiently. Customer service falling over at a time when customers are already stressed about rates rising week by week is a headache no lender wants. Reputationally, this environment is very tricky to navigate while one simultaneously takes a responsible approach to financial risk.

This year’s report hasn’t got all the answers, but it does shed a lot of light on the challenges and how some lenders are addressing these.

Knowing what the problem is is the first step toward solving it. M I www.mortgageintroducer.com

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

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or many years, it’s been possible for mortgage advisers to make a healthy living by focusing on their core business.

Looking after customers in a particular sector of the market has often been sufficient to help maintain and grow a healthy company.

Of course, successful advisers have also needed to be accomplished in their specialist areas. Having initiative and drive, great communication skills, and clear objectives are essential attributes to help you achieve your goals.

Adaptability has also been a key indicator of success. Now, however, this could be the differentiating factor between those who survive and those who thrive. Focusing on meeting a fairly narrow set of needs carries a risk. And you can no longer afford to put all your eggs in one basket.

WHAT IS DIVERSIFICATION?

Diversification is a strategy to enter a new market in which your business doesn’t currently operate. As a mortgage adviser, the great advantage you have is that diversification doesn’t require you to develop a whole new set of skills.

Instead, the key is to adapt your existing skills and apply them to a different sector of the financial services market.

There are many other products and services which, as a mortgage adviser, you may choose to offer. Some of these, however, are a more natural fit than others, and involve less retraining.

For example, the later-life sector is thriving, especially with the costof-living crisis squeezing retirement income while property values remain high. The skills you’d use to be an effective adviser in this sector are the

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[B]y operating in different sectors, you’ll boost awareness of your brand, which could even mean you retain a higher share of your core market, as well as attracting new business same as the ones you use in your dayto-day role. You’ll need an additional qualification, but you can study for it and qualify in about six months.

Similarly, if you’re not currently offering your customers advice across the full range of protection products, you can easily develop your knowledge to do so. This has the obvious advantage of enabling you to help customers who don’t currently have any need to borrow but might, for example, be looking to protect their income as we enter a recession.

If you’re prepared to spend more time on developing your knowledge, you could consider studying for a qualification in financial advice. That would enable you to provide holistic financial planning and advice across a whole range of your customer’s needs.

Then again, if you prefer to focus on the lending side of your business, what about moving into areas of specialist property finance? Demand for bridging loans, buy-to-let mortgages, commercial finance, and development finance remains strong. Now is a good time to develop your knowledge in these areas.

You may also want to start building relationships with specialist lenders and join a relevant trade body or network that specialises in supporting advisers in these types of lending.

WHAT ARE THE BENEFITS AND RISKS OF DIVERSIFICATION?

The key benefit of being able to advise in different areas of the market is increased adaptability. You’ll be able

MORTGAGE INTRODUCER NOVEMBER 2022

to bend and flex according to where there’s demand and, conversely, you’re less likely to take a hit if demand for your current skills and services falls.

You will be able to attract a broader range of customers and service a wider range of their needs.

By securing your income in this way, you’ll be in a better position to plan future developments for your business. Finally, by operating in different sectors, you’ll boost awareness of your brand, which could even mean you retain a higher share of your core market, as well as attracting new business.

However, diversification will likely increase the number of processes you have to follow and policies to comply with. That can increase the risk of making mistakes.

To reduce this risk, you will almost certainly need to undertake more CPD, even if it is not a regulatory requirement.

You may even need to invest in additional hardware and software or employ additional staff.

HOW TO DIVERSIFY

The first thing you must do is to complete your research. Make sure you understand the sector of the market you are considering entering.

Conferences, webinars, and the trade press can all help here. Our own mortgage conference in November, for example, will bring together experts in mortgages, later-life lending, and protection, with a strong focus on adviser development to discuss the future of the sector and the market.

Think about your customers and where you may be best able to serve their additional needs. For example, do you have quite a mature client base, who might benefit from later-life financial planning advice? Or do you tend to have younger customers whose protection needs may be paramount?

This approach will give you a strong indication of how you can diversify to complement your current offering. M I www.mortgageintroducer.com

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Pivot, pivot, PIVAAT! Matt Smith MD, WPB

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o sooner was the queen buried in September than the nation’s hopes of a stable financial future met an equally unhappy end in Kwasi’s mini budget. Even the Bank of England had the good grace to not pile on the misery while Her Majesty lay in state. But cometh the hour, cometh the man with a plan few appeared to think was a good idea.

In a revised version of Dante’s inferno, there might be another circle of hell for chancellors who have clearly misread the mood of the nation (and the nature of gilt markets), which, it turns out, doesn’t care so much about economic growth. People just want to see their debts paid.

As a result of the debacle, we have already had a U-turn on the notorious top rate of tax cut – and a new chancellor – but the markets are not truly placated and neither is the party. By the time this makes press, we may have had news from the OBR on how the great giveaway will be paid for, but currently, two-year swap rates stand north of five per cent. This is an almighty payment shock for those coming off fixed rates from a couple of years ago.

People genuinely do not understand mortgages at the best of times – how they are funded, how compound interest works, etc. They simply see monthly payments go up or, in the worst case, become unaffordable.

With the FCA’s consumer duty of care rules in full force from July 2023, who would want to be a broker now – advising on paying back ERCs on current products to take higher fixed rates that

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may deliver some decidedly poor outcomes over the next couple of years? Lenders, for their part, will be watching knowing that if this does go sour, history tells us that those with the deepest pockets invariably get told to foot the bill.

Some lenders have run for the hills; others are simply waiting and seeing; still others are staying the course. But my guess is that most will be gearing up their arrears departments (probably with the same people who helped with the completions bubble some months ago). Retail savings rates are not reflecting the rises yet, but in January 2023 lender repayments for COVID loans are due, which might sharpen pencils and focus minds on improved savings rates.

Of course, not all lenders will be suffering – that will depend on the type of lending they have been doing – but calls into lenders requesting moves in payment dates or moving from one monthly payment to two are increasing and, elsewhere, reports of growing numbers of forbearance calls are being reported. One lender confided they had gone from 12 per week to 18 in one day – and we should bear

MORTGAGE INTRODUCER NOVEMBER 2022

in mind these are people who have had payment difficulties before, so they know what process and support are available to them. There will be many more distressed borrowers in denial who haven’t actually picked up the phone yet.

Change is truly in the air. In other markets in which I work, the results of Trussonomics have been equally unwelcome (unless you are shorting the pound). For insurers and reinsurers, the inflation problem underpins the concern that the cost of putting things right is increasing exponentially. You can see why.

Wildfires, flooding, storms, etc. all demand repairs and preventative infrastructure that sucks up resources that are in short supply. Inflation in this respect is structural – not just a global supply-chain/Ukraine issue.

I happen to think inflation is anything but temporary, so higher interest rates are not going to dissipate any time soon. We are well and truly moving through the credit cycle. Thousands of people who fixed only eighteen months ago will get a shock in a couple of years, and lenders will be focused on managing risks as much as market share.

The saving grace is that we have full employment, so to speak. As long as that remains the case, we might yet dodge some of these bullets. But the focus has changed – it’s not about how much you write but whether you have the right lending on your books to weather a storm.

As for our PM, well, giving Labour a poll lead of the size they currently enjoy, sidelining the OBR, and insisting “We are not for turning” don’t say anything good about the tone-deaf nature of our leadership. Nor can I honestly believe MPs in marginal seats (the MPs didn’t want Truss; the membership did) will compliantly follow her for the next two years.

Expect more U-turns everywhere. As Ross Geller so wisely reminds us, it is the age of the Pivaat! M I www.mortgageintroducer.com

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Understanding equity release means understanding borrowers’ motives – and the likely risks Steve Goodall MD, e.surv

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ore than 200 homeowners per day over the age of 50 drew cash from their homes using equity release between April and June this year, according to the Equity Release Council. Although Q3’s figures are still to be published, it’s likely that this number will have increased.

Inflation close to 10 per cent is taking its toll on almost all households, with those in lower income brackets facing awful choices on where to spend what little money they have and what they must forgo.

For pensioners, the cost of living during ordinary economic times tends to be lower than average.

Not so when inflation runs riot.

A recent briefing note from the Pensions Policy Institute states that in 2022–2023, very few pensioner income sources will increase in line with the cost of living, except for public-sector pensions or RPI-linked defined benefit pensions.

Both the basic state pension and new state pension increase with at least earnings inflation, consumer price inflation, or 2.5 per cent, whichever is the highest. But last year artificially high wage inflation caused by the furlough scheme the year before prompted government to cancel the triple lock.

Although state pensioners have been promised an inflation-linked rise for 2023–2024, that higher income won’t actually come through www.mortgageintroducer.com

until April next year.

With the bulk of inflation coming from rising energy bills, even with the price guarantee and emergency support payments factored in, older people have been hit hard.

Those who have retired are likely to need the heating on higher than most of us, and for longer during the day. The price of food is also going up – still – and the Bank of England has shown it has no plans to ease monetary policy to appease families facing financial crisis.

Mortgage payments, credit interest, and rents are all on the up as well.

Those over the age of 65 are likely to have seen their financial positions hit harder than those in younger age brackets, and it is changing their behaviour.

The Office for National Statistics’ latest Over 50s Lifestyle Study shows that in August this year 72 per cent more 50- to 59-year-olds were thinking about going back to work than had been in February.

Two out of three of those people said their motivation was money.

But not all retired people are able to go back to work for an income boost.

As pensioners age, their health needs change, disabilities become more prevalent, and mobility is impaired over time.

Data from the Pensions Policy Institute shows, in fact, 57 per cent of retired households have a member with a disability, compared to 32 per cent of non-retired households.

As pensioners age and spend more time at home, the proportion of income spent on food, health, housing, and energy increases. So does wear and tear on their home, necessitating more frequent maintenance, and sometimes alterations to the property to accommodate the less mobile.

It’s therefore unsurprising that we’re seeing more and more people turn to equity release – whether it’s to pay off the mortgage before rates go up further or to help cover the cost of living.

Those in retirement today are more likely to own their own homes and have significant equity in them.

Data compiled by Canada Life using Halifax house-price index figures suggests there was a record £811bn available to release from homes owned by those over the age of 55 across England, Scotland, and Wales in Q2.

That is an extraordinary sum, and lenders view lifetime mortgages as a loan with virtually no affordability risk. Given the cost of energy, heightened uncertainty in international geopolitics, and a new government whose first budget sent markets into a tailspin in the days that followed, low affordability risk looks a lot more attractive than it has for a while.

This perspective has merits, but it should not be the only one considered carefully. When it comes to equity release, the security risk is often higher than on term mortgages.

As I’ve already said, the increased wear and tear and maintenance that come with people being at home more of the time can be considerable. Home alterations necessary for the lifetime mortgage borrower can affect resale values. As people age, they also become more vulnerable.

The rewards for lenders offering lifetime mortgages are clear, and so should the risks be – because they matter when it comes to assessing value. Boots on the ground are often the only way lenders can really know anything about these properties – which may not have been mortgaged for some time. M I

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REVIEW

ADVICE

Arrange the following words: “Frying pan, fire, jump …”

Tim Hague MD, Sagis

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’m loath to set the scene for this month’s column, so rapidly are things changing. As I write, lenders have pulled more products in the past 24 hours than has ever happened before.

Unless we’re in for even more radical change, the Financial Conduct Authority (FCA) is expecting regulated firms to be ready to implement its new consumer duty rules by 31 July next year.

Even if lenders weren’t facing a commercial assault born of the toxic cocktail of sharply rising interest rates, swap rates spiking overnight, inflation close to 10 per cent and tax cuts that fail to support those most in need, this would be an ask.

Adapting systems and processes to accommodate regulatory change is always time-consuming, onerous, and expensive. Of course, lenders have no choice but to get on with it, but working out how to deliver services and products that are compliant with the consumer duty is considerably tougher than other regulatory change has been.

If you are expected to adhere to the consumer duty, you need to know what it is. The FCA has issued guidance for lenders on this point.

This states: “The consumer duty is underpinned by the concept of reasonableness. This is an objective test and means that the rules and guidance must be interpreted in line with the standard that could reasonably be expected of a prudent firm.”

The FCA’s expectations of firms under the duty rules are many. Among them, firms should:  put consumers at the heart of their business and focus on delivering

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good outcomes for customers  provide products and services that are designed to meet customers’ needs, that they know provide fair value, that help customers achieve their financial objectives and which do not cause them harm It sounds sensible – and yet, where regulation is concerned, the spirit of the rules must be underpinned by evidence of the firm following them. How do you measure good outcomes that haven’t happened yet? What harm are we talking about here? To what extent can a lender reasonably be expected to protect their customers from harm?

It’s ironic that I’m penning this today, of all days.

Moneyfacts recorded a 935-product drop in residential mortgage products on the market, more than double the previous record daily fall of 462 on 1 April 2020 at the start of the COVID-19 lockdown.

This morning, there were 2,661 residential mortgage deals available, but lenders are still pulling them. Yesterday, that figure was 3,596, and last Friday, it was 3,961.

Kwarteng’s budget policy announcements have crashed markets, crashed the pound, and sent market interest rates up several per cent in less than 72 hours.

Who would have predicted this just three months ago?

Let’s imagine ourselves in this situation once the consumer duty does apply. How on earth can lenders act responsibly from a prudential perspective and responsibly under the consumer duty rules at the same time?

How do lenders measure such things?

Harm is caused to those whose fixedrate mortgage ends in the coming months, especially in the middle of a cost-of-living crisis. Several reports in the media suggest five-year fixed rate mortgages will be 6 per cent within weeks – the best buy at 80 per cent is already up to 3.84 per cent. Borrowers

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needing to remortgage from a two-year deal will see their payments rise by hundreds of pounds a month.

Is it more harmful to let them lapse onto standard variable rate without a reassessment of affordability or to attempt to remortgage, only to find they fail on affordability and cannot remortgage? There are provisions, of course, to do a like-for-like without the need for affordability checks, but when affordability for a five-year deal was initially stressed on the product rate which is lower than the product rate to which they are now switching, it will be interesting to see how lenders comply with the sentiment of consumer duty.

With energy bills now hundreds of pounds a month and food inflation over 10 per cent, never mind the cost of everything else, hundreds of thousands of homeowners may well now fall into arrears. Rumours are that arrears divisions are already gearing up and bodies being moved in to cope. For many customers it is inevitable, and it’s still going to be a massive problem come 31 July.

This is a very real nightmare for lenders. Do they repossess? When?

Negative equity now looks like a real risk again. Is it worse to take the roof from over their heads before they cannot afford to repay the mortgage and are left homeless and in tens of thousands of pounds of debt?

These are very difficult questions to answer from a moral standpoint. What is reasonable in the extraordinary circumstances we find ourselves in today?

Even more difficult is how lenders can answer the practical questions of quantifying harm, reason, and good outcomes.

No one has the answers. But I suspect it is brokers who are best placed to work them out. This mess is going to have to be sorted out one case at a time. Lenders who engage early with brokers to understand the nitty gritty clients are facing stand, possibly, a fighting chance of navigating what’s to come. M I www.mortgageintroducer.com

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LONDON

London’s new-build homes will remain a challenge Robin Johnson MD, KFH

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gainst a backdrop of rising interest rates, international inflationary pressures, and mass employment, the government launched its own fiscal Exocets to stimulate growth. Everyone gets something – the question is, will they use it the way the government hopes? The markets gave their verdict, crashing the GBP to near-record lows at the time of writing. The chancellor doubled down on tax cuts. A weaker pound is, of course, inflationary, but also offers foreign buyers a significant discount on the capital’s property prices.

[I]n July ... the Greater London Authority told developers it would be a decade before electricity grid capacity would be high enough to sustain new homes being built in west London Earlier last week, the chancellor specifically referenced the importance of London as a global centre for finance, and the well-trailed abolition of the cap on bonuses for bankers was reiterated as evidence of this. Indeed, the agenda for growth will arguably support much of London’s economy and international attractiveness and competitiveness.

Changes to corporation tax, income tax, and stamp duty will also play a significant part in this. www.mortgageintroducer.com

But for homebuyers, we should not ignore the likely event of further inflation as a result of these measures stoking higher interest rates to support the pound – which, of course, will translate into higher mortgage rates and put a further squeeze on affordability.

That the threshold of how much a property has to cost before stamp duty is paid has been changed from £125,000 to £250,000 is welcome, as is the raising of the amount on which first-time buyers currently pay no stamp duty from £300,000 to £425,000. Discounted stamp duty for first-time buyers will apply up to £625,000, an increase from the previous £500,000.

It’s clear to most that homebuyers in London and the South East of England will benefit the most from this. They pay 65 per cent of all stamp duty, as prices are higher in this region and the tax is particularly focused on homes of more than £500,000. Three-quarters (76 per cent) of stamp duty came from homes priced at more than £500,000.

But we should remember again that interest rates are rising, and with them the cost of borrowing, which will provide a break for many. This move will be reflected in house-price growth as per previous tax cuts, so affordability will continue to be an issue.

The London market has always changed because of policy interventions, and in his mini budget then-chancellor Kwasi Kwarteng went further when he announced full stamp duty relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for new residential development. The hope is that this will stimulate housebuilders into overdrive, encouraging investment and spending on development and the ancillaries that go with it.

Clearly, it’s a welcome move by the

new government given the shortage of new-build homes in the capital, but I’m more reserved on whether (and when) it will really alleviate stock shortages. There are too many other factors affecting construction – the lack of bricks, the cost of construction materials, a shortage of skilled builders, electricians, and plumbers – and now, increasingly expensive borrowing costs.

Even where the infrastructure does exist, there’s still the question of sufficient resource. This was highlighted in July, when the Greater London Authority told developers it would be a decade before electricity grid capacity would be high enough to sustain new homes being built in west London.

Ironically, it’s the development of new infrastructure that is exacerbating the pressure on grid capacity. West London has seen massive investment from big technology companies in recent years, with firms such as Google, Microsoft, and Amazon basing new and increasingly large data centres in the area.

I hope the government’s stamp-duty cuts may well reverse homebuilders’ decision to cut back on new developments, particularly with the closure of the help to buy scheme at the end of October. The starter homes scheme should support firsttime buyer demand and ease affordability challenges, too. There are a lot of reasons to support some of these initiatives, but even so, they are happening at a difficult time when other inflationary considerations may take the wind out of their sails.

It may, in this climate, not be enough to boost activity significantly.

Every little bit helps, of course, but my guess is the market for new homes will continue to evolve more gradually than government might hope. M I

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RECRUITMENT

On the echo chamber effect Pete Gwilliam owner, Virtus Search

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modern-day irony is that we now have greater access to information than ever before, but often find ourselves in echo chambers with people who share our opinions and worldviews. We all have a natural tendency to gravitate toward people who think like us, but that can lead to simply reinforcing similar opinions and forgetting that there are other people who think differently. Echo chambers can make it difficult to understand opposing viewpoints.

When we are constantly exposed to ideas or beliefs that confirm our own position, divergent opinions get marginalised because of their reduced visibility, and if everyone seems to be agreeing it can lead to a self- righteousness that isn’t healthy. Social media platforms use data to feed us more of the content we regularly digest, and it takes a conscious effort to follow accounts that you don’t always agree with to get a wider perspective and broaden the feed the algorithms would otherwise offer.

The best leaders are always open to new ideas and insights from their teams, whilst realising team members don’t always feel comfortable sharing everything they know/think. Regularly soliciting feedback and input from your team will help you identify any concerns or problems before they become larger issues, especially if you gratefully receive and respect challenging comments (which, in turn, will encourage more to speak up).

Listening to a different perspective and not judging the person for holding a point of view that may be based on values that are drastically different

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to your own is difficult. There is a big difference between listening to understand and trying to find angles to convince others their view is not as valid as your own.

Being able to respect someone else’s opinion, even when it’s drastically different from your own, is a crucial life skill (even more crucial when you’re in a management role); moreover, so is the necessity to realise reframing an opinion that was once entrenched doesn’t mean you’re a failure. It means that you’re willing to grow.

We will all recognise the times when we have been in discussions in which both sides focussed more on what they wanted to say than what the other person was sharing. Neither is truly acknowledging what the other person says, and certainly there is no increased understanding of the alternative perspective. It’s still about one person being right and the other person being wrong.

When we shift perspective to seeking to understand, we can almost always uncover the shades of grey.

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We discover the areas of commonality in what seem to be opposing views.

We start to recognize that differing views are not necessarily mutually exclusive. Questions allow you to delve deeper into trying to understand why other people believe what they do – but only if those questions come from a place of open-minded curiosity rather than judgment.

When people do disagree because of entrenched positions, communication breaks down, which only pushes the conflict underground – and what goes unsaid and unheard will simply resurface again later.

Recognize that although you can potentially influence others’ decisions and behaviours, you have no control over the choices that other people make, and any fundamental change in view derives from a basis of trust, which relies on people feeling accepted for who they are and the views they hold.

It is accepted that echo chambers can change whom people trust, largely leading those in a particular chamber to distrust everybody outside of that chamber, and leading an insider’s trust for other insiders to grow unchecked.

There is no doubt in my mind that this polarizes society.

We can all see distinct and different groups of people living in different worlds, populated with totally different facts, and effectively forming ”them v us“ camps on issues such as Brexit, asylum, climate change, masks, and vaccinations.

Whether or not culture wars are being orchestrated and inflamed to suit political agendas, we can consciously choose to be better and realise the danger of relying on our own echo chamber.

Hearing only like-minded views is not going to enrich decision-making, and worse still is discrediting outside perspectives because you have already made your mind up and your echo chamber has emboldened your belief. M I www.mortgageintroducer.com

Confronting the EPC Challenge: The path to a sustainable rental market Our new whitepaper analyses the impact of the rising cost of living on the UK’s private rented sector, as it has added a new dimension to the energy efficiency conversation.

While changes to the Energy Performance Certificate (EPC) regulations are still proposed for 2025, the growing importance of energy efficiency for tenants can’t be ignored.

Download our new report for the latest insights on how the market, including brokers, can face into the EPC challenge and help build a more sustainable rental market.

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property.shawbrook.co.uk

REVIEW

TECHNOLOGY

Why the answer is never 42 Mark Blackwell COO, CoreLogic

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ccording to Douglas Adams’s 1979 science fiction novel The Hitchhiker’s Guide to the Galaxy, the answer to life, the universe, and everything is 42. How did they work it out? The supercomputer told them.

Adams wrote his book more than 40 years ago, long before personal computers were mainstream – but not before algorithms.

How is this related to the housing market in 2022? Adams was no stranger to the idea that what computers spit out in their algorithms depends entirely on what is put in. Putting in data describing life, the universe, and everything is, by virtue of the volume of data, meaningless.

Considering the concepts of big data and analytics have been around since the mid 2000s, we’ve still not mastered how to use them effectively all the time. Data isn’t helpful unless you know what to do with it. Key to getting it right is not to pile in more data sets; it’s to learn how to interpret multiple sources to support human judgement.

Ultimately, lenders are running a business. Their business is to lend money secured on homes that their customers want to buy. Data can be used to inform the lender how much is safe to lend against that home or to that person, but it should never be relied upon without scrutiny.

When it comes to assessing risk – which, ultimately, is what algorithms aim to aid – judgement must be employed, because almost all data is imperfect. Factors that affect the value of a property are numerous.

Is the property leasehold? What are the ground-rent conditions? What is

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its proximity to HS2? Is the imminent construction of a four-lane motorway planned in view of the property? Is it located on a flood plain? Is it located on what might become a flood plain given climate change? Is it too close to a coast at risk of erosion?

There are scores of data on this type of thing, and it is useful up to a point.

Of course, no lender wants to approve a mortgage on a property built on top of a nuclear waste disposal site. But data can also swing risk assessment far too far away from what is sensible.

Take London and the South East of England. The soil on which all homes and properties are built has its foundations in London clay. Clay is notoriously vulnerable to shrinkage, caused by variation in moisture content. Cutting down a tree whose roots retract can tip an entire terrace into a twist. Climate change creating hotter, dryer spells followed by torrential rain plays havoc with London clay. Subsidence in the capital is more common than anywhere else in the UK. So, higher risk. And as our summers get hotter and our winters wetter, that risk is rising still further. The geological data says don’t lend. But it’s London.

Jobs are there. Theatres are there. Art galleries, people, the international rich and elite are there. England’s entire transport and energy infrastructure is designed to connect to London.

This is a perfect example of why it’s so important to involve judgement in decision-making. Data is vital to inform good judgement, but it cannot, at the moment at least, be relied upon in isolation.

Data is by its nature backwards-looking as well. The past is often a very good guide to the future – but not always. I’m not suggesting that people can get out their crystal balls and accurately predict the next economic crash, either, but we can recognise that change is coming and from where before it shows up in the data.

Fifteen years ago in the UK, affordability data wasn’t considered – only income ratios and self-declared

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income. Automated valuation models used in 2006 and 2007, when house prices had been rising consistently since the mid 1990s, didn’t have the data to anticipate the crash that followed Northern Rock’s collapse and the effect that uncurbed sub-prime lending would have on property values around the world.

Anyone could see the writing on the wall by the autumn of 2007. Persistent insistence that the US housing market sneezing really didn’t mean the UK would catch a cold was a marketing exercise born of desperation as credit markets closed.

There were people who foresaw the economic catastrophe that no job, no income, no assets loans would stave off far, far earlier.

This is why it is so important that markets remember to evolve their thinking. When it comes down to it, markets consist of people making decisions. Algorithms account for an increasingly large proportion of those decisions, particularly in stock markets. But when it comes to risk decisions in niche areas, when the law of averages does not apply, data can take you only so far.

Its value is not in its presence. It is in the prescience it can afford if given to the right person to interpret. M I www.mortgageintroducer.com

REVIEW

TECHNOLOGY

Time is (increasingly) of the essence Neal Jannels MD, One Mortgage System (OMS)

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here has been a huge amount of coverage recently regarding the possible impact of increasing mortgage rates on potential borrowers and existing homeowners, and rightly so. Although that’s certainly not to say that all of this coverage has been balanced. Some of the figures being bandied about when nobody was, or is, certain of the exact impact on the mortgage and housing markets over the immediate, short, or medium term have been a little frustrating, to say the least.

This is not a time for hyperbole or scaremongering, but we have seen plenty of both in the national media.

However, and very tellingly, we are seeing far less from those business operators at the coalface who are, thankfully, keeping a much clearer head. A number of broker voices have also emerged in the national press and on social media in the wake of the market turmoil, and the ones I saw, at least, offered a far more considered opinion. Such voices demonstrate the professionalism and expertise that exemplify our industry, and I salute all of those who have stuck their heads above the parapet to help reassure borrowers in what are, quite frankly, scary times for many.

And this all comes at a time when brokers are working harder than ever to support a range of clients in the wake of some extreme lending conditions.

Which leads to the question, who is supporting the brokers?

I would hope that they have a strong www.mortgageintroducer.com

support network at home to rely on – and from a business perspective, when time is so precious, I would hope that the investments made in technology will help them to identify those clients in most need, not to mention helping them from an efficiency perspective to free up more time to be on-hand to offer this advice.

Time is especially valuable for those potential borrowers and homeowners who are looking to secure their first or next mortgage deal with immediate effect. All of which is placing even greater pressure on advisers, and on the power of technology, to alleviate concerns.

However, it’s not just securing a mortgage or remortgage that is generating frustration across the housing and mortgage markets.

Research from Smoove’s Home Movers Report outlined that the average time taken to buy a home and have the keys in hand is more than five months.

Within the last six months, the average time taken to complete the home-purchasing process has stood at 153 days. By contrast, in 2019 it took 124 days – meaning there has been an increase of 29 days, or 23 per cent.

Smoove said the increase is most likely a result of the post-lockdown boom, as changing consumer lifestyles and demand outweigh supply, combined with greater capacity constraints for solicitors, and local authority searches taking longer to complete, likely due to technology failures or a large backlog.

The home-moving process also continues to be a very protracted, fragmented, and analogue experience, with many checks and documents still needing to be in physical form, rather than being signed or reviewed digitally. As a result, nine in 10 homeowners found the process stressful. Among the top stressors were the sheer length of time it took

to complete the process (40 per cent), the lack of certainty (34 per cent), and waiting for exchange and completion dates to be finalised (33 per cent).

The research shows that the length of time spent filling out forms, such as property title deeds, EPCs, local authority searches, and transaction and conveyancing forms, is a particular aggravation for homeowners. The documents that take the longest to wait for and complete include mortgage applications/agreement in principle (22 per cent), ID checks (18 per cent), and local authority property searches (16 per cent).

According to Conveyancing Data Services (CDS), the average length of time to receive personal searches from local councils across England and Wales was between nine and 11 days in August. However, while the majority of councils are processing requests within a reasonable timeframe, some councils are taking longer on search times, such as Middlesbrough (35 to 40 working days) and Havering (65 to 70 working days).

In such a turbulent lending environment, an even greater number of obstacles is being placed in front of all components within the homebuying journey, and with digitalisation and automation playing such an integral role in this process, it’s important to maintain impetus in this area where possible.

From a client perspective, advisers need to use technology (like OMS) to identify concerns, provide tailored advice, deliver appropriate solutions, and communicate quickly and effectively. This is easier said than done under such intense pressure, but, as always, the intermediary community can be relied upon to rise to the challenge and demonstrate their ongoing value. M I

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BUY-TO-LET

Taking aim at BTL is short-sighted Richard Rowntree MD, mortgages, Paragon Bank

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n previous Mortgage Introducer columns I have talked about the challenges posed by a volatile economy, but couldn’t have predicted upheaval of the magnitude experienced by the industry following the mini budget.

At the time of writing, intervention by the Bank of England and a U-turn on the planned scrapping of 45 per cent income tax has stabilised the economy somewhat, but we are in a period of uncertainty.

Recent announcements suggest that politicians sitting on both sides of the House of Commons see a thriving housing market as an essential component of national prosperity, so, while I can’t predict the fate of the economy with any level of certainty, one thing that I can say with confidence is that anti-landlord sentiment will continue.

Never too far away from political posturing and promises, housing policy was a notable focus of this year’s Conservative and Labour party conferences, giving us a clue to the direction of future policy.

Conservative MPs were more open in their criticism of the private rented sector (PRS) than we’ve seen previously, spearheaded by former housing secretary Michael Gove, who spoke of rogue landlords and poor housing stock.

Labour Party leader Sir Kier Starmer said that if elected he would set a new target for 70 per cent of homes to be owner-occupied, up from the current 63 per cent, achievable through a new set of political choices that would see “no more buy-to-let landlords or second homeowners getting in first.”

Similar to the Tories’ “Fairer

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private rented sector” white paper, many of the measures outlined by Labour seem sensible – long-term tenancies and a national landlords register, for example. It is also encouraging to hear the party say it would consult with lenders and landlord groups as well as tenants on various aspects of the sweeping reforms. But, for all the listening, there is also a lot of talking that I feel is unhelpful.

Shadow levelling up secretary Lisa Nandy told private renters that they have “the right to live in a home that isn’t cold, mouldy, damp, and unfit for human habitation.” This goes without saying, but is unfortunately an all-toocommon picture painted by politicians, suggesting that such conditions are the norm and not a minority of extreme cases.

With both Labour and the Conservatives outlining plans for a new decent homes standard, I think the role of buyto-let lending in improving standards in the PRS should be acknowledged.

Industry figures show a drop from 46.7 per cent to 23.3 per cent in the proportion of privately rented homes classed as non-decent between 2006 and 2019.

During this time, the number of outstanding buy-to-let mortgages increased from 835,000 to 1.9 million.

Paragon doesn’t lend on poor-quality homes, and I’m pretty sure many of our competitors don’t either. Put simply, it’s bad for the customers we have a duty to protect, it’s bad for tenants, and it’s bad for business.

Research carried out for the Social Market Foundation’s Where next for the private rented sector report found that 81 per cent of renters are happy with their current property, and 85 per cent say they are satisfied with their landlord.

Such stats highlight how the notion of uninhabitable homes let by conscienceless landlords is a misconception in many cases. Unfortunately, this narrative plays on our national view of homeownership as a hallmark of aspira-

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[W]hile it may be popular with voters, policy that removes the incentive to invest in the PRS will lead to a contraction of the sector, which, in turn, will limit supply already failing to meet demand tion and success, one that isn’t seen in some other countries like Germany.

Instead, championing first-time buyers trying to provide homes for their families and pitting them against tycoon-like landlords is more effective in garnering voter support than admission of the uncomfortable truth that PRS investors contribute a valuable societal role in filling the gap left by the undersupply of affordable homes under successive governments.

Supplying the numbers of new homes promised by politicians will require significant investment and infrastructure at a time when interest on national debt is at a record high, so this is unlikely to be achieved in the short term.

In the meantime, those who cannot afford to buy their own homes – likely to be a growing number due to rising interest rates and the cost-of-living crisis more broadly – will continue to rely on rented accommodation. So will those, such as young professionals or essential migrant workers, who choose PRS properties due to their flexibility or close proximity to busy city centres or places of work; the sector is home to people from all walks of life, so its health has broader implications for our economy.

This means that while it may be popular with voters, policy that removes the incentive to invest in the PRS will lead to a contraction of the sector, which, in turn, will limit supply already failing to meet demand – and ultimately harm the very people it is trying to protect: tenants. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

First-time buyers have steep hills to climb Cat Armstrong mortgage club director, Dynamo for Intermediaries

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t’s not easy to sum up recent events, especially when, at the time of writing, we still don’t really know the full extent of their impact, if there will be any further government U-turns in the offing, or what other changes might be coming our way.

From a buy-to-let perspective, it’s important to evaluate all elements when assessing any potential impact on the sector, and this is especially evident from a residential purchasing standpoint. So let’s start with how higher mortgage rates are affecting buying power, as this is likely to have a direct impact on tenant demand.

Recent analysis from Zoopla showed that higher mortgage rates could reduce buying power by as much as 28 per cent if mortgage rates reach five per cent by the end of the year, assuming buyers want to keep their monthly repayments unchanged.

The property portal anticipates that higher mortgage rates will have the greatest impact on buying power in the high-value markets of London and the South East – as well as regions such as Wales that have registered the greatest surge in house prices over the pandemic. It says there are early signs that price sensitivity is emerging, as six per cent of homes listed for sale have seen the asking price adjusted downwards by five per cent or more – the highest level since before the pandemic.

Rising living costs seem to have become the greatest barrier to purchasing a home, with seven out www.mortgageintroducer.com

of ten (72 per cent) prospective first-time buyers (FTBs) affected by the ongoing crisis. This is according to new research from Aldermore, which added that this factor has delayed a third (32 per cent) in buying a property and realising their home-buying dreams, with delays of 20 months on average. Nearly two-thirds of all first-time buyer hopefuls have had to scale back their regular savings (64 per cent), likely increasing the time it takes to get on the property ladder, while one in five (19 per cent) has had to look for a cheaper home.

This data helps to emphasise the scale of the challenges currently facing FTBs and the ever-increasing reliance on the private rental sector.

From a buy-to-let standpoint, landlords, lenders, and buy-tolet (BTL) specialist brokers/clubs are certainly not looking at these struggles with any glee, far from it.

We all appreciate that FTBs remain the bedrock of a healthy housing and mortgage market, and these markets function best when the supply of affordable housing is strong, when there are consistently high FTB numbers, when rents remain at reasonable levels, and when there is far greater economic certainty.

Whilst I’m at it, there’s also another preconception to shatter – that landlords are selfish and are only interested in maximising their profits.

In the face of rising living costs, a huge number of responsible landlords are playing their part in reducing the burdens being faced by their tenants.

This was evident in research from Shawbrook which suggested that 75 per cent of residential landlords have taken steps to support tenants during the current cost-of-living crisis.

With 85 per cent of tenants having made lifestyle changes to cope with

inflationary pressures, many landlords have been taking action to help. 25 per cent have frozen rents, while 22 per cent have offered a payment holiday to those who needed it. Twentytwo per cent have offered those who are struggling with their finances a reduction in rent, and 19 per cent have offered rent inclusive of bills.

Fourteen per cent of landlords haven’t made any changes in response to the cost-of-living crisis, but say they would be willing to do so if their tenants are having financial difficulties in the future. Thirty-six per cent of renters surveyed said they would consider asking for a reduction in rent, and 35 per cent would consider asking for a rental holiday. In addition to offering direct financial support for tenants, 26 per cent of landlords have made energy efficiency upgrades – such as insulation, double glazing, or a new boiler – to their properties to help with rising energy bills.

As outlined in this research, in order to have a fair and sustainable rental market, it’s vital that landlords be open to supporting their tenants through some tough times, and it’s extremely reassuring to see that a large percentage of landlords are doing just that.

There is often a somewhat lazy narrative around a perceived FTB v landlords battle. It’s true that they may sometimes be in competition for certain properties, but that doesn’t mean they cannot coexist or that landlords are anti-FTB. After all, their actions in helping tenants to overcome some challenging financial times will help pave the way for a greater number of tenants to potentially achieve their property ownership dreams in the future. So let’s give these landlords the credit they are due. M I

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PROTECTION

In tough times, it pays to spread your professional wings Alan Lakey director, CIExpert

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hen I talk with networks and affinity groups, I often hear the disconcerting news that mortgage brokers only arrange protection insurance for one in four mortgages.

Many reasons are given – the broker is too busy dealing with enquiries, or the broker lacks confidence when discussing protection, and the old chestnut that the broker lacks sufficient knowledge regarding protection. Let’s be honest: it’s not good enough. Mortgage borrowers deserve better – and don’t forget that there are other canny advisers out there looking to poach clients, which may also involve arranging their next mortgage, remortgage, or product switch.

Brokers cannot afford to risk losing valuable clients, particularly with the economic woes that lie just around the corner.

There are numerous reasons why brokers need to immerse themselves in the world of protection. First, there is an obvious financial impetus.

A fully comprehensive mortgage protection plan will almost certainly provide a commission payment higher than the procuration fee from the mortgage. Two income streams from the one mortgage – surely that makes sense? A secondary financial motive is that, like regular mortgage reviews, it is likely that future protection reviews will result in an upgrade to the protection. Critical illness plans are improving all the time, and resources such as CIExpert

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enable a swift review, allowing an upgrade conversation to take place.

So why wouldn’t a broker assist his/her clients when they have an obvious and immediate protection need? Is it a lack of knowledge, a fear that an incorrect recommendation might bounce back as a complaint? There are two ways to address this. The first and most obvious is to accumulate the relevant knowledge, networks, affinity groups, and insurers, all offering a range of learning materials, whether it be face-to-face meetings, webinars, or podcasts.

CIExpert offers copious amounts of information regarding critical illness plans, claims statistics, and the various conditions included.

The mortgage world will be in turmoil for the next two years – maybe longer – and those brokers who ignore protection may come to regret their head-in-the-sand approach Those brokers who remain unwilling need to consider a liaison with a protection specialist. This form of signposting has proven itself over the past two years, with firms such as Vita assisting MAB members, and Future Proof doing the same for SJP partners. This offers benefits for both parties, allowing the broker to focus on mortgages and the skilled adviser to assist clients in a more focused way than a busy broker could.

The mortgage world will be in turmoil for the next two years – maybe longer – and those brokers who ignore protection may come to regret their head-in-the-sand approach. The last economic crisis

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forced many out of business because they did not have other types of business to fall back on.

Now, let’s factor in the incoming consumer duty requirements. Firms should already have a framework showing how their actions meet the new requirements. Would a broker be meeting these rules if he arranged a long-term debt and failed to offer a solution to the potential for premature death, diagnosis of a critical illness, and possibly loss of income due to ill health? One of the key messages relates to consumer support; therefore, ignoring protection needs must be termed a consumer duty failure with potential consequences.

Let’s chuck another concern into the mix. Brokers have a common-law duty to assist their clients, a duty buttressed by the consumer duty obligations. Let’s not get this tested in a courtroom. Imagine the scenario in which a broker has assisted a client in accumulating a £250,000 debt and failed to raise the subject of protecting that debt. Some time later the client dies, and the person’s spouse, assisted by a predatory claims management firm, files a complaint. What will the Financial Ombudsman Service decide if that complaint reaches their desks? They are likely to ask for the file and scan it for evidence that the subject was broached. A lack of evidence might compel the FOS to find in favour of the complainant – and don’t forget, the FOS can award compensation of up to £355,000, a figure that would likely bankrupt many small firms.

So, whether as a defence mechanism or as a means of providing a more rounded service, brokers need to stretch out and better understand how to advise on protection. Failing that, a liaison with a specialist firm would appear to be the answer. M I www.mortgageintroducer.com

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PROTECTION

Getting commercial-property insurance Alan Richardson head of expert advice, LifeSearch

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riting something new about protecting mortgage debt was always going to be challenging, but with the recent announcement that stamp duty on commercial and new-build properties is to be scrapped, I suspect we’re about to see some changes in the market.

I want to focus on the commercial market and the ramifications for protection.

Commercial property returns have for some years seen yields two to three points higher than those on residential B2L property. This is driven in the main by much longer lease agreements than the Assured Shorthold Tenancies (AST) that are the norm in residential letting, which in turn drive the instant increase in value when a vacant property is leased to a good tenant. For some, such extended agreements may be seen as a drawback, but for many, the removal of stamp duty on purchases of these properties will surely, and as intended, stimulate sales. This is even more attractive on commercial property, as the stamp duty was based on the total purchase price, inclusive of VAT. What, then, does this have to do with life insurance? Let’s talk this through.

LENDING CRITERIA

With the introduction of the consumer duty cross-cutting rules, and the behaviours set out therein, it is reasonable to assume that lenders will see insurance as a tool to fulfil this duty. It has often frustrated me that commercial lending usually requires

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fire insurance in place, but lenders seem unconcerned about the health of the owner. This may be more of an issue for owner-occupied properties, but statistically, over a 25-year period, a 42-year-old is significantly more likely to encounter financial hardship through health issues than fire. To illustrate this: In 2019, there were 2,300,000 commercial properties registered in the UK. Of these properties, 15,005 suffered a fire that resulted in claim that was met, after excess. This, aggregated up, equates to a 13.9 per cent chance of an owner needing to claim, on average, £62,000.

Over the same period, I, as a nonsmoking 42-year-old, have a 28 per cent chance of not being able to work for two months or more. I have a 15 per cent chance of suffering a serious illness, and a six per cent chance of death. There is a 36 per cent chance of any of these happening. Just looking at these percentages suggests the impact of health risks is likely to be significantly higher than that of fire risk.

COMPANY OWNERSHIP

Any search through an aggregator’s website will produce an indication of costs for insurance. Some might even apply medical or avocation loadings.

The unwary client or adviser might then look to progress one of these policies and even get the policy on cover. What most won’t realise until it’s too late is that they have purchased a personal cover. With a little thought, the claim might even pay into trust, with their spouse and children noted as beneficiaries. But this perfectly valid policy won’t provide the outcome that is needed for either party. Nor has the policy been set up in the most taxefficient way.

To achieve this, an adviser qualified to arrange business protection is needed. Only a policy owned by

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the company can be assigned to a lender. Their insurable interest is the mortgage provided to the company, not the individual, and as such, they will expect to correct ownership.

Having the company pay for the policy when arranged in this manner is tax-efficient at both the premium payment and claim stages.

Getting this cover arranged does take a little more understanding and time, but, when done right, will save many thousands of pounds.

INHERITANCE TAX

Most commercial lending is provided on a capital repayment basis. This will result in full ownership of the property, hopefully, by the end of the term. This is important because the criteria for assets to qualify for business property relief (BPR) (an exemption from Inheritance tax) is often misunderstood, and even now evolving. It’s important to understand that BPR is applicable to trading companies. A company that exists as an investment company won’t, in many cases, meet this trading criteria.

This means that a huge asset that has risen in value will now be contributing to a client’s estate valuation – and, subsequently, the inheritance tax against that estate. Life Insurance is a great tool to fund any potential tax settlements in these circumstances, and, again, requires expert advice to be arranged correctly.

Writing protection is often perceived as being easy, and sometimes it is. But as with any trade, getting it right to meet the specific needs of the client takes experience. The next time you’re looking at commercial lending, please don’t suggest your client look online – put them in touch with an adviser who will take the time to understand what they require and provide the protection that suits them. M I www.mortgageintroducer.com

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PROTECTION

Amateur sports enthusiasts shouldn’t ignore risks Mike Allison head of protection, Paradigm Mortgage Services

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here have been many shocking stories recently about former sporting heroes being diagnosed with all sorts of degenerative diseases as a result of their professional careers.

For instance, just recently we have heard that motor neurone disease (MND) is now deemed to be 15 times more likely in former professional rugby players than in the general population.

Leading neurologist Dr Willy Stewart, from Glasgow University, found the risk of any neurodegenerative disease was more than double for former international rugby union players.

Former Scottish internationals were at just over twice the risk of developing dementia and three times the risk of Parkinson’s.

The shock finding comes after rugby legends Doddie Weir, 52, and Rob Burrow, 40, were diagnosed with the devastating condition caused by the death of the nerves that carry messages from the brain to muscles. It affects the ability to move, talk, and breathe. Most people, unfortunately, die within two years of being diagnosed.

Dr Stewart’s previous research resulted in under-12s being banned from heading footballs during training.

His latest analysis – comparing 412 former Scottish international male rugby players with 1,200 individuals from the general population – revealed that the chances of them being diagnosed with a neurodegenerative disease were 2.67 times higher.

However, there was an even bigger www.mortgageintroducer.com

risk for MND, with rugby players being roughly 15 times more likely to be diagnosed with this disease than those within the same age range – that is, born before 1991 – in the general population.

We know this is an incredibly complex problem and an area in which – like many other diseases – there are constantly calls for research.

While I am mentioning research, a big shout-out should from this column to William Lloyd Hayward for his amazing efforts in supporting the Alzheimer’s Society via the charity ball he organised in September – raising in excess of £50,000. A magnificent effort by him and all the team at Brightstar, as well as the many contributors, of course. It is only through research that these diseases can be fully understood and cures found.

Dr Susan Kohlhaas, director at Alzheimer’s Research UK, has noted that rugby means so much to so many – it is a game that inspires, that brings people together from many cultures around the world. She went on to warn, however, that, “as with all contact sports, it has risks. While the benefits of physical exercise on brain and heart health are well known, multiple studies show links between traumatic brain injury and the development of dementia. It’s concerning to see research now identifies former male rugby players as being at increased risk of dementia and at particularly high risk of motor neuron disease.”

More recently, and bringing it down to a simpler level, I was recently made aware of a case of simple fracture cover that supported a Zurich client, who had taken out a life with critical illness policy with Zurich in September 2018.

The client had a nose fracture in 2019 via a freak accident, and then a further one when working on a ladder four months later. The client

commented that he was grateful to have the cover in place, as he needed surgery both times.

While as advisers you hear stories like this continuously, it is good to hear clients speak about the benefits as well as the reassurance that insurers do pay claims – something the industry as a whole is fighting to reinforce.

We can get hooked into the process of linking life-cover amounts with mortgage amounts and debts, but it is vital that in the new consumer duty era we all try to remind clients of the types of insurance that exist out there and don’t just focus on those core products.

From the highest-profile people to an average client, insurance can provide all with support, whether it be fracture cover, the traditional three, or even dementia and frail care support from Vitality, in addition to the hybrids provided by the likes of Met Life.

I have had a number of conversations with insurers over lengthy periods of time now as to how they can support advisers by informing them of ongoing claims, whether it be life, CI, or income protection – or any other, for that matter.

My view is that if people are going through a claim process, then they are potentially vulnerable either financially or through stress. Given the heightened awareness of client vulnerability and its inextricable links to consumer duty, this is one way in which providers can work with advisers to support them in their duty of care to clients, and in some cases get an extension to, or some kind of replacement for, cover once they have had a claim.

Elite sport is not for everyone, but insurance should be – there is always going to be risk involved, and it’s highly important clients have the cover necessary to mitigate against it. M I

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PROTECTION

Not rocket science Shaun Almond MD, HLPartnership

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hy are house prices so high and why is property so scarce?

The stock answers that get trotted out in almost every debate include everything from greedy second homeowners pricing locals out of their own towns and villages to selfish older homeowners not downsizing to allow a new generation to aspire to larger properties to Uriah Heap-style landlords buying up property and putting those dwellings beyond the reach of ordinary buyers and especially first-time buyers.

All of those are symptoms that have their platform in an emotional context based on a haves-and-have-nots litany to which the mainstream press is happy to draw attention.

However, the number-one reason, and one to which I have subscribed for a long time, is the simplest to understand when looked at through a purely economic lens. It is all about supply and demand. A shortage of supply means that as long as people have the means and desire to buy, prices of available property will increase. It

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really isn’t rocket science.

Not enough houses are being built to meet demand and, as with all other commodities where demand outstrips supply, the importance of that commodity is expressed in terms of the value put on it by potential buyers.

As we enter the final quarter of the year, with a new king and a new prime minister, it is good to see that housebuilding statistics have turned positive. It was only last month that I quoted from Homes England about the missed housebuilding targets, saying, “Housing programmes delivered

by Homes England resulted in 38,436 new houses starting onsite and 37,164 houses completed between 1 April 2021 and 31 March 2022, as the sector began to recover from the COVID-19 pandemic.”

Today the latest data from the government is more encouraging. Figures show that record numbers of housing developments were started during the second quarter of 2022.

Government data on housebuilding starts and completions shows the number of dwellings where building work has started onsite was 51,730 in the three months to the end of June.

That is a 21 per cent quarterly rise and a 15 per cent annual increase. It is also the highest level on record, with figures going back to 2002. However, for anyone who has grown tired of inflated projections on the basis of

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little evidence, we will wait to see whether this welcome news is actually sustainable before we call it a real upward trend.

FACT AND FICTION

I read that c. 30 per cent of mortgage holders are worried that they won’t be able to afford their repayments because of rising rates, which is a shocking statistic. However, I wonder whether the 2,000-people sample was taken only from among those with a variable-rate mortgage, as I am pretty sure that another, older survey claims that over 74 per cent of mortgage holders are on a fixed rate. Not only that, but UK Finance also claims that since 2019, 96 per cent of new mortgages have been raised on a fixed rate, which makes the immediate concern over mortgage Armageddon not so instant, although it makes great clickbait for the tabloids.

But there is an underlying issue: when those fixed rates end, what will the rate for a similarly termed mortgage be? The two- to five-year fixed rates that are the most common ones in service might very well not be long enough to see another low base rate environment arrive in time. As it is, UK Finance estimates around nine per cent of those whose fixed rates are due to end this year, or around 117,000 borrowers, will have less than 10 per cent of their income left over as disposable income after moving to a new deal.

So, whilst a fixed-rate mortgage buys clients time, what should they do now? Should they wait it out or seek another fixed rate with a longer end date, even if they might have to settle for a higher rate, to get the comfort of knowing that that their costs will be fixed for longer?

Only by talking to a human mortgage adviser can customers really get a true analysis of their choices. This is where the value of an experienced broker is far greater than any online provider. M I www.mortgageintroducer.com

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GENERAL INSURANCE

Supporting landlords through the cost-of-living crisis Geoff Hall chairman, Berkeley Alexander

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s I write, the National Residential Landlords Association (NRLA) is calling for a cost-of-living plan for the private rented sector as both landlords and their tenants face ever-growing costs.

The report by NRLA points to recent official data showing that 69 per cent of private landlords are basic-rate taxpayers, highlighting why they’re not immune to the crisis.

While we wait to see whether the government will implement NRLA’s suggestions, there’s an opportunity for advisors to step in and provide valuable advice and protection.

First, for your professional landlords, consider a multi-property policy. These offer the ability to insure an entire portfolio under one policy.

This may be a more cost-effective option, and reduces the administration burden for you and your client, as there is one renewal date, one annual review, and one claims line to call in the event of a claim.

Second, my urgent advice to all landlords is to act quickly and secure rent guarantee policies while you still can.

In the current crisis even the most reliable tenants could experience financial difficulties, and therefore the likelihood of rent arrears is higher than ever. Many landlords are also still struggling with the impact of arrears built up during the pandemic. Rent guarantee policies provide valuable protection to cover rental income should tenants be unable to pay. During the pandemic we saw a www.mortgageintroducer.com

number of providers withdraw from offering cover to new clients. Whilst the circumstances are very different now, have the conversation with your landlords and speak to your GI provider to secure policies for landlord clients sooner rather than later.

FCA FOCUS ON MULTIOCCUPANCY BUILDINGS INSURANCE

The Financial Conduct Authority (FCA) has raised significant concerns over the way the market operates, and the increasing premiums seen, within the multi-occupancy buildings market (blocks of flats). Rapidly increasing insurance premiums, often due to construction/ cladding concerns, have resulted in significantly increased and sometimes unaffordable costs resting with the flat leaseholders.

It’s an important topic. My view is that property managers are paid a service charge for activities related to the upkeep of buildings, and this includes the placement of insurance.

Seeking alternatives when costs are rising seems a reasonable expectation rather than simply sticking with the current provider and passing the cost to the leaseholders.

As advisors you’re well placed to assist property managers in doing the right thing. If you have a good relationship with your GI provider, reviewing the market could possibly help your clients to pay less and keep leaseholders happy.

WHAT IS NON-STANDARD INSURANCE?

Non-standard has traditionally been a catch-all term for insurance needs that fall outside of standard household policies – risks like thatched roofs, listed buildings, underpinned properties, or policyholders with

previous criminal convictions.

However, the way we live continues to change, and the nature of risk evolves. Our homes and the relationships we have to them look very different today than they did 50, 10, or even three years ago, and this has had an impact on what non-standard means today. Working from home, for example, is no longer unusual, but rather the norm for a large percentage of the population following the pandemic, and property risks that were previously considered non-standard are increasingly becoming standard, such as non-standard materials and alternative methods of construction.

However, it’s not just the building that creates a non-standard insurance need. We receive weird and wonderful requests from time to time – for instance, we are increasingly seeing clients with highly expensive e-bikes that often still fall outside of standard parameters. These non-standard items are often things that the broker only becomes aware of in conversation. It reinforces the importance of regular contact with clients and getting to know them individually. Non-standard isn’t always just about the chocolate-box thatched listed property or the converted water mill – it’s not just about the structure, but about the individuals who live there, too.

My advice is to be thorough in your conversations with clients. Whilst the “big data” three-question set style quotes currently available in the market have their place, they may not identify more non-standard requirements. You only find out about those sorts of things by talking to customers in more depth.

If unsure, speak to you GI provider.

They will be able to assist with bespoke quotes for those non-standard or difficult-to-place needs. M I

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GENERAL INSURANCE

Capitalising on the biggest remortgage GI opportunity in a decade Emma Green director of distribution, Paymentshield

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n the past month, mortgage repayments have been thrown into sharp focus for millions of people up and down the country.

With the trajectory of interest rates looking like it’s only going up, the remortgage market is experiencing an intense wave of activity – indeed, the cohort considering remortgaging right now extends well beyond those whose mortgages are actually due to mature this year.

Our annual adviser survey consistently shows that remortgages are a big area of missed opportunity when it comes to selling general insurance (GI). In our 2022 survey, over one in five advisers said they don’t discuss GI with remortgage clients at all, with nearly three in five admitting they sometimes miss opportunities to sell GI more generally.

Given the scale of the remortgage market right now, we’d urge advisers to actively get into the habit of having GI conversations with their remortgage clients. Not only couldwthis bring in a reliable additional source of income for advisers at a time when the wider market is in a state of flux, but it also presents them with an opportunity to add value and support their customers at a time when many will appreciate that more holistic service offering.

It’s fair to say that protection products aren’t always top of mind for customers, and years can pass before insurance is even on their radar again.

But the fast few years have prompted major lifestyle changes for many, and customers may find that the insurance policy they currently have is no longer

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suitable for their needs – particularly those who have been on a five-year mortgage term.

The pandemic saw many of us undertake home improvement projects, with the appetite for extensions and new buildings soaring as we sought to create more space for things like home gyms, offices, additional bathrooms, summer houses, or just extra living room. The passing years might have brought other changes, too – clients may have had children, or acquired big-ticket items like an expensive bike.

All of this means that clients’ policies might be out of date, with an inadequate level of cover that isn’t meeting their current needs and is leaving them financially exposed – a position no-one wants to be in in the current economic climate.

On the flip side, clients’ circumstances might have remained the same, but offering to review their current GI policy could see you saving them money while still offering the same level of cover – something they would undoubtedly appreciate and that would help strengthen the clientadviser relationship.

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Getting into the habit of discussing GI needs with all clients now is also in the spirit of the incoming FCA consumer duty, and will stand advisers in good stead for when that comes into effect next July. With a focus on good customer outcomes, underpinned by consumer support, the reform is intended to promote responsibility across the whole retail financial services industry. For advisers, “good customer outcomes” could be interpreted as making sure customer policies are still appropriate, or at the very least having a referral option in place to ensure customers can get support with this elsewhere if you aren’t personally going to discuss GI with them.

In short, the remortgage market is ripe for this right now, and advisers should, if they aren’t already, be using it as an opportunity to check in with clients about their insurance needs.

And that practice needs to become a long-term habit rather than something that flexes with the peaks and troughs of the market. For advisers, general insurance can be a steadying force in a turbulent industry. M I www.mortgageintroducer.com

REASSURING EVERY REMORTGAGE CLIENT

Focusing on insurance might not be top of your client’s priority list when arranging a remortgage.

However, by offering to look into their current arrangements and find the right insurance for their needs, you can provide reassurance their home and everything in it is properly protected.

paymentshieldadvisers.co.uk/reassure 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 10/22 02241

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EQUITY RELEASE

Tough times will pass, but equity release is here to stay Andrea Rozario COO, Bower

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olitics certainly isn’t boring at the moment. These past couple of years feel like they have crammed in enough history to last a lifetime, and it shows no signs of slowing down. To be honest, I really don’t envy politics students of the future when they come to the 2020-onwards module – that’ll be a thick textbook!

For the current government, it feels like the end may be in sight before they’ve even had a chance to settle in. Indeed, around Westminster there seems to be a real 1997 vibe and, if the opinion polls are to be believed, the Conservatives are heading to the end of their 12-year reign.

However, we are still a few years out from a general election – unless the Tories pull another surprise on us and call one earlier, of course – so there is still time to turn the tide for Truss and co. But it will be tough.

The ongoing cost-of-living crisis, Brexit headaches like the Northern Ireland protocol, and the tragic war in Ukraine show no sign of abating.

Plus, sectors like the property market and mortgage trade, as well as the broader economy in general, feel particularly twitchy in response to the new, rather audacious approach Truss’s Tories are pursuing.

For equity release, my corner of the wider mortgage industry, many will be worried this economic instability and resultant rate rise will knock us back from the solid progress we have been making post-COVID. So I am here to make the case for why the lifetime

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mortgage is in it for the long haul.

First off, the retirement finance landscape has changed enormously.

Why? Well, for one, people are living far longer than they used to. Today, the average person can expect to live into their eighties, whereas just a few decades ago this was much rarer. This has had a huge impact on how people live their lives after their careers – mostly down to the simple fact that they have much more time to budget for. However, there is another reason things are different for retirees today, and it comes down to something a little less tangible: attitude.

Today’s retirees aren’t like their parents and grandparents. They have different outlooks, hopes, and goals for their retirement. After all, those retiring now grew up in the 1960s and lived through the Summer of Love, were young adults during punk, then hit maturity in the 1980s. Of course they will be different from their parents and grandparents, who lived through war and austerity.

I often wonder how many of our clients once sported a Mohican or wore a power suit in the ‘80s. I think people sometimes expect older clients to forget their previous lives and fit into some sort of homogenous ‘old person’ box, but this is false.

Beyond past fashion choices (or fashion crimes), you may argue, today’s retirees see their finance plans for later life through a totally different prism. In the past, the traditional pension would have reigned supreme as the primary retirement finance vehicle. Today, however, many retirees are well aware that it’s assets like their property that will also be something to consider. And whilst saving for retirement for the younger cohort is encouraged far more today, it’s those baby boomers who have to look at all options.

According to a recent report pub-

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lished by the Equity Release Council celebrating their 30-year anniversary, 57 per cent of homeowners surveyed were interested in accessing money from their property as they get older.1 And I will bet this percentage will only rise. Why? Well, another stat from the report reveals that over a third (34 per cent) of homeowners are worried about running out of money in retirement.2 So tapping into property wealth – the asset that most homeowners will say has been their biggest success – will increasingly become something to consider.

Regardless of current instability and upheaval, millions of people across the country will be entering retirement needing financial help and choices.

Property wealth is the choice many may need to secure the retirement they want.

So how do they make this a reality?

Downsizing is one option, for sure, but this in turn needs careful consideration.

Ultimately, options like remortgaging and accessing products within the equity release suite, along with more products that develop alongside the increasing need, will come to the forefront for many homeowners. Property wealth is becoming an integral part of modern retirement planning, and products like the lifetime mortgage will have a much bigger role to play as the retirement landscape continues along this trajectory.

With the country, and indeed the globe, going through tough times, we need safety nets we can rely on, along with safeguards and choices that will support future generations of retirees who wish to have a comfortable and fulfilling retirement. M I 1 https://secure.webpublication. co.uk/18541/.Equity-Release-Council-anniversary-report-2022/#page=11 2 Ibid. www.mortgageintroducer.com

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EQUITY RELEASE

Legacy planning – a generational divide Alice Watson head of marketing – insurance, Canada Life

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he drive to leave a legacy for loved ones is often deepseated and can sometimes feel like it’s irretrievably embedded within our national psyche.

Canada Life has researched this desire to find out if it really is part of our national identity or if trends are starting to emerge across the generations.

The analysis of 3,000 Brits threw up some interesting changing priorities for advisers to consider when considering legacy planning.

For most of us (46 per cent), the idea of providing financial security for family members was the most important priority when it came to leaving a legacy. This was followed by leaving behind a property (36 per cent) and a lump sum or investments that can be inherited (25 per cent).

However, the research does suggest some significant generational differences emerging, which could have a major impact on how advisers engage with their clients on inheritance planning. Millennials, for example, who are now aged between 26 and 40, tend to put greater emphasis on ensuring their legacy will lead to a more equal society, with 40 per cent saying this is very important, compared to just 30 per cent of those aged between 56 and 75. With this younger generation expected to inherit wealth as part of the great intergenerational wealth transfer in the coming years, understanding their priorities when it comes to future financial planning will be key for advisers. www.mortgageintroducer.com

These generational differences also extend to whom they want to receive their financial legacies. Our research found that UK adults are most likely to want their children to receive it, with over three-fifths (63 per cent) of adults saying this. More than four in 10 (41 per cent) would leave their wealth to their partners, and over a fifth (22 per cent) to their grandchildren. However, millennials are more likely to leave their legacy to their siblings (21 per cent), compared to eight per cent of boomers.

Some people may look to pass on their financial legacy while still alive.

Looking amongst our own equity-release customer base, we can see that 15 per cent released equity to give as gifts to family or friends in H1 2022.

However, this is not the most popular reason to release equity, with clearing an existing mortgage (50 per cent), funding home improvements (38 per cent), and supporting dayto-day living costs (20 per cent) all accounting for more business.

Passing on wealth to loved ones has long been an important part of financial planning; however, the

[R]esearch does suggest some significant generational differences emerging, which could have a major impact on how advisers engage with their clients on inheritance planning pandemic and the great wealth transfer have accelerated conversations around intergenerational planning. This presents a unique opportunity for advisers to expand their client base, as well as create further value in their own business models as funds flow between generations. It’s also an opportunity for advisers to build greater connections with their clients and to expand the advisory relationship beyond the traditional focus of the primary client. Building relationships with the wider family earlier by having the conversations that span generations will clearly demonstrate both the role and value of advice. M I

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CONVEYANCING

Right conveyancing partners offer way around growing completion times Karen Rodrigues sales director, eConveyancer

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he time it takes to complete a house purchase is growing.

The latest study from our parent company, Smoove, found that over the last six months it has taken on average 153 days to complete the home purchasing process. To put that into context, back in 2019 it took just 124 days. In other words, since the onset of the pandemic, the time to complete a purchase deal has grown by almost a quarter.

There are various drivers behind the increase in completion times, though it’s certainly true that some lenders have encountered difficulties in processing cases. This has led to an extension in turnaround times, and, understandably, frustration for brokers and borrowers alike.

Indeed, in some cases lenders have withdrawn from the market entirely for a short period, in order to work through their pipeline and get their service levels to a point at which they are comfortable returning to the market.

There are understandable concerns that this situation may become even more pronounced in the weeks and months ahead. The government’s decision to cut stamp duty makes home purchases more attractive, since buyers get to sidestep the additional tax bill, which may lead to a further increase in activity levels.

There’s also the incredible turmoil that we have seen in the mortgage

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market generally. The fallout from the mini budget has been extraordinary, with lenders rushing to withdraw and reprice their product ranges at record rates. With brokers and their clients desperately trying to get their applications in on time, it has put those service levels under even greater strain, a situation that may take some time to rectify.

THE JOB OF THE BROKER

This service conundrum simply adds to the workload brokers face.

The advice process has always been more involved and complex than simply using a sourcing system to find a cheap rate. The best brokers really get to grips with their clients’ situations, to establish not only what they can afford but also the sort of products they are going to be most comfortable with, as well as what lender will be best placed to help them access the finance they need.

Ordinarily that selection process would focus more fundamentally on criteria, identifying the lenders who would take a more positive view of any exotic, out-of-the-ordinary element to the case.

However, in recent months it has become even more pressing for the broker to factor in turnaround times and service levels. It’s no coincidence that we have seen mortgage technology firms come forward with systems allowing brokers an insight into the service levels at different lenders in one place, from the time taken to respond on live chat services to the typical timescale for moving from application to offer.

TAKING THE STRAIN

Given the work that brokers have

MORTGAGE INTRODUCER NOVEMBER 2022

to put into keeping on top of lender service levels, as well as their product ranges, it is understandable if they don’t want to replicate that workload when it comes to conveyancing.

After all, there are only so many hours in the day.

However, there is little value in the broker selecting a lender because they are able to process a case swiftly, only for the deal to be held up because the conveyancer is struggling to handle their own workload.

That’s where a panel manager can work out well for brokers. In addition to building a comprehensive panel of conveyancers, allowing you to choose the most experienced and knowledgeable for your case, quality panel managers also play a hands-on role in monitoring the capacity of the conveyancers on that panel, ensuring that brokers are able to select legal partners who are going to be able to work on the case immediately.

At eConveyancer, for example, we hold weekly pipeline reviews with the top legal firms on our panel, allowing us to ensure that the highest standards of service are on offer.

This hands-on role means that brokers and their clients enjoy a consistent, reliable experience.

There is only so much that a broker can do in order to set a case up for success, only so much of the strain that they can take. Partnering with firms that understand the broker’s business, and that can handle some of that responsibility in terms of pushing things forward, allows brokers to spend more of their time on what they do best – helping their clients find the right mortgage deal. M I www.mortgageintroducer.com

COVER

REMORTGAGING

NERVY BORROWERS SEEK REMORTGAGES EARLY Rising interest rates and cost-of-living fears spur property owners to contact mortgage brokers well before their current deals end, Simon Meadows writes

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s interest rates have escalated over the past year, so too, it seems, have the jitters of mortgage borrowers. Brokers are reporting that their clients are seeking advice on remortgaging well in advance of the ends of their fixed terms, in some cases more than six months before – even before mortgage advisors contact them to revise their deals.

With the annual rate of inflation soaring, driven mainly by energy and food price hikes, the Bank of England has increased interest rates with worrying regularity since last December to what is now the highest level seen in years. This has left borrowers concerned that they may face eye-wateringly high mortgage repayments if they leave renewal too late. Further interest rate rises seem likely, with serious implications for the industry and potentially higher mortgage rates. This will do nothing, of course, to quell the fears of anxious property

“Since we’ve had the increase in interest rates and increase in inflation, it’s becoming more apparent that clients want to do something earlier” RUSSELL CLARK

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MORTGAGE INTRODUCER NOVEMBER 2022

owners, who are tempted to switch to a cheaper deal before rates peak.

Russell Clark, a senior mortgage advisor with Andrews, has witnessed a distinctive change in some borrowers’ behaviour. Where once he was making the first contact with his clients to remind them that their mortgage agreements were due to expire, now some are contacting him, many months earlier.

“Since we’ve had the increase in interest rates and increase in inflation, it’s becoming more apparent that clients want to do something earlier,” Clark said. “People are worried about the cost-of-living at the moment – as the song says, ‘the only way is up.’ In real terms, we have had low interest rates for a while because of low inflation and COVID, so we have been in an artificially low place.

“Clients are worried that over the next couple of years we are going to have issues, so they want the security of knowing that, if they can afford it [a fixed-rate mortgage] today, they can hopefully afford it over the next two, three, four years. They are looking at mostly five-year fixed rates.”

Clark has over 20 years’ experience in financial services and completes around 100 mortgages a year, of which 25 to 30 per cent are remortgages.

“We tend to contact our clients, on average, about four months before [their terms expire],” he explained. “We have a CRM system that will drop someone an email saying, ‘Look, you’re coming to the end of your fixed rate, do you want to have www.mortgageintroducer.com

COVER

REMORTGAGING

“There are a lot of people now, especially in the next 12 months, who will be coming out of their fixed-rate period, and they could find that their mortgage costs have potentially doubled” KARL WILKINSON a chat to refresh what’s happening, what your thoughts, your plans are?’

“A lot more clients are actually contacting us a lot sooner, some of them even [sooner than] six months before. You have to say, ‘Look, I can’t do anything, the earliest I can probably do something is six months beforehand.’ A couple of lenders are starting to increase that time period, but I think that needs to be across the market so we can secure rates for our clients earlier.”

Clark is finding that some clients are prepared to pay a product redemption charge to exit their existing mortgage deals early, in favour of what they perceive as a recession-busting deal. “We’ve had some clients who have said, ‘I want to pay my penalty to get out,’” he shared. “We certainly wouldn’t advise that. Whatever that penalty is, normally thousands of pounds, clients sometimes want to do that for peace of mind. It sometimes doesn’t make financial sense; you point that out to clients. But if it’s their wish, then that’s up to them.”

In an increasingly volatile market, Russell Clark points to lenders constantly juggling and switching their products and the need to act fast before deals disappear. No-one, of course, knows how long this downturn will last, but some of Clark’s clientele remain optimistic, it seems. “I did a two-year fixed-rate this week for a client who genuinely thinks that this is going to be a short-term blip,” he confided.

According to the Office of National Statistics, of nearly 25 million dwellings in the UK, 6.8 million – 28 per cent – are owned with a mortgage or a loan, and with one in four homeowners in the UK estimated to be on a lender’s standard variable rate, (SVR) that’s likely a lot of nervous borrowers watching rising interest rates with trepidation. One thing’s for certain: many are not prepared to sit idly by and find themselves overwhelmed by unmanageable repayments.

“There has been a fundamental shift in the remortgage market over recent months from a passive to an active sale,” reflected John Phillips, national www.mortgageintroducer.com

operations director at Just Mortgages, which has advisors throughout a network of more than 200 estate agents nationally. “Historically, thoughts of remortgaging would only surface when an existing deal was coming to an end and there was a passive attitude of ‘OK, what can I get now?’”

“This switch to the next best-available product was often with the same lender and only slightly more proactive than those borrowers who passively let their mortgage roll over onto a lender’s SVR. However, our brokers across the country have been reporting a significant surge in proactive remortgage interest for the past six months. This was motivated in part by the first rise in the current bank base rate in December last year, but in our organisation [also] through a proactive programme of brokers communicating with clients to make them aware of the options available to them.”

Phillips added, “In a rising interest rate environment with household budgets stretched by significant costof-living increases, the value of a well-timed remortgage has never been greater. Although borrowers typically wait until the end of a mortgage term to avoid early termination charges, our brokers are encouraging all borrowers to look at the fees in the context of longerterm value. Mortgage rates are rising daily and securing a product before it is withdrawn can offset any penalty charge. The remortgage market cannot afford to stay passive. Now is a time for action, and brokers need to be active in assessing the viability of remortgaging for their clients.”

On average, there are around 39,000 homeowner remortgages every month in the UK. Buy-to-let mortgage provider Landbay is based entirely online and, since its launch in 2014, has overseen £1.2bn in lending across more than 3,000 loans. It believes that the current market is making borrowers more conscious of lending rates.

“A whole generation of landlords and homeowners have never seen an interest rate rise until recently,” →

“With household budgets stretched by significant cost-ofliving increases, the value of a well-timed remortgage has never been greater” JOHN PHILLIPS NOVEMBER 2022 MORTGAGE INTRODUCER

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COVER

REMORTGAGING

said chief operating officer Paul Clampin. “It has made borrowers increasingly aware of the rates of interest they are paying and what those may rise to, which is naturally creating a level of uncertainty.

“We saw a small number of applications made earlier in the year in which applicants were trying to book rates with longer completion dates before rates increased. The challenge for lenders remains being able to hold rates in a rapidly changing market where funding restrictions naturally dictate that there is a finite period of offer eligibility.”

He added, “Fortunately, 83 per cent of borrowers in the UK are on fixed-rate contracts. No doubt those on variable rates or whose fixed rates are coming to an end will be looking to find a fixed rate again as soon as possible.”

Remortgaging accounts for about 40 per cent of Access Financial Services’ business, according to CEO Karl Wilkinson. “With my own customers, they are contacting me seven or eight months before,” Wilkinson said. “They are saying, ‘Is it actually worth paying my redemption penalty, it might be a small percentage of the loan amount to fix something now, because God knows what’s going to happen in six months’ time.’ We have to be realists; we have to tell these customers the worst-case scenario as well as the best-case scenario. They really need to know what’s going on, what could happen, and prepare for it.”

Wilkinson, who’s been a mortgage broker for 17 years, founded his business in 2017. It has a 160-strong team of mortgage advisors across the UK. “There are a lot of people now, especially in the next 12 months, who will be coming out of their fixed-rate period, and they could find that their mortgage costs have potentially doubled,” he stated. “They can’t get anything as good as what they had 18 months ago. You’ve got customers who are generally a little savvier because they are now starting to think about their finances.

They are thinking about utility bills and the cost-ofliving going up and they’re trying to work out ways of saving money. People are now starting to think, ‘What do I have to do to stay in my house?’ Life insurance and income protection sales have gone up.”

Wilkinson noted that some lenders are also trying to get ahead in the current market. “I think that lenders are being a little bit more aggressive in their approach to trying to get the customer earlier,” he said. “If lenders can cut out the broker, obviously they don’t have to pay commission.

“I would say to every single customer out there, whether they have got a broker or not, speak to someone. Speak to someone now, at least to get peace of mind and forward plan six months into the future. A

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MORTGAGE INTRODUCER NOVEMBER 2022

“A whole generation of landlords and homeowners have never seen an interest rate rise until recently.... It has made borrowers increasingly aware of the rates” PAUL CLAMPIN

decent mortgage broker, a good-quality mortgage broker, should be helping these customers to plan – almost like a financial planner, looking at their whole finances to make sure that they’ll be OK. If you’re a broker, reach out to your customers, six or seven months beforehand.”

The outstanding value of all residential mortgage loans was £1,648bn at the end of Q2 2022, 3.8 per cent higher than a year earlier. Such is the volume of applications submitted currently, explained Karl Wilkinson, that it is taking months rather than weeks for a mortgage to complete. “A rate will be there one day and gone the next, and, in fact, lenders have been so busy that they can’t cope with the number of applications going in,” he emphasised. “It shows that people want to get their next two or five years fixed so that they know where they are.”

Tracker mortgages are to be avoided in the current economic climate, he said, but he supports fixing for the longer term. “If it was me personally, I would probably fix for five years,” Wilkinson advised. “We have seen more five-year fixes than two-year fixes, and I think a lot of that is because the volatility is going to be for more than two years.”

Wilkinson noted that some borrowers trying to navigate the current challenges are finding themselves falling short of the stringent criteria for a new deal. “I don’t think the government and lenders are doing enough to help people who are in the mortgage trap,” he suggested. “What I mean by that [is] there is a need to remortgage but they can’t afford to remortgage because their income has dropped or something like that. But they have clearly evidenced that they make their repayments.

So they might end up being stuck on standard variable rate.”

He sounded a final note of caution for the powers-that-be in terms of the economy: “If the Bank of England, or even the lenders, increase their rates too much, that could be the straw that breaks the camel’s back.” M I www.mortgageintroducer.com

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER

SPECIAL REPORT

LENDERS 2022

Recognising the 5-Star Lenders, outstanding firms consistently delivering for their clients

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CONTENTS

PAGES

Feature article ......................................................... 38 Methodology........................................................... 39 5-Star Lenders 2022...............................................41

NOVEMBER 2022 MORTGAGE INTRODUCER

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BUSINESS STRATEGY

SPECIAL REPORT

5-STAR LENDERS 2022

QUALITY SERVICE IN A CHANGING MARKET

By Jake Carter

THE MORTGAGE industry is undergoing a period of uncertainty. However, Mortgage Introducer’s 5-Star Lenders have adapted and tailored their services to achieve results despite the difficult line they are having to tread.

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), says, “I think over the last few years

the market has become more and more dominated by mortgage brokers, as opposed to lenders doing things direct.”

And he explains what has driven this movement. “Because consumers have voted with their feet and many lenders or some lenders are intermediaries only, and others have found that actually it’s more cost efficient for them to operate through brokers

WHAT IS MOST IMPORTANT TO BROKERS WHEN CHOOSING A LENDER? (1 = least important, 5 = most important)

4.69

Interest rates

Customer service

4.31

Turnaround time

4.28 3.38

Technology

Loan programmes

Marketing

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2.53 1.91

MORTGAGE INTRODUCER NOVEMBER 2022

“Lenders who are really focused on delivering good service to brokers are the ones that are winning in the long term” Robert Sinclair, AMI rather than doing it direct. So, what I think we’re seeing is the lenders who are really focused on delivering good service to brokers are the ones that are winning out in the long term.”

According to the Financial Conduct Authority’s published data, the outstanding value of all residential mortgage loans was £1,648bn at the end of Q2 2022, 3.8% higher than a year earlier. Research from the Bank of England (BoE) shows that the value of new mortgage commitments (lending agreed to be advanced in the coming months) in Q1

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2022 was 6.7% greater than the previous quarter and 6.6% greater than a year earlier, at £82.5bn.

It is clear that responsive and communicative lenders have established the upper hand in today’s climate.

“A good lender is one who will see out all the offers that are currently on the table, and also one that gives reasonable time for brokers to complete inflight transactions.

They give a reasonable amount of time for the customer to get their information together and for the broker to complete the application,” Sinclair adds.

METHODOLOGY To uncover the best lenders in the eyes of the UK’s broker community, Mortgage Introducer reached out to brokers across the country, asking them to rate the lenders they work with across three key areas: tracker mortgages, fixed-rate mortgages and standard variable rates.

Mortgage Introducer also asked brokers to weigh in on important aspects of the broker-lender relationship, such as interest rates, turnaround times, customer service, technology, loan programmes and marketing. Lenders that earned an average score of 4 or higher in each key area were recognised as 5-Star Lenders.

What makes a lender stand out?

A key aspect of what has enabled lenders, like Mortgage Introducer’s 5-Star winners, to gain recognition is understanding who they are trying to serve.

“There are a large number of lenders in the UK, some of whom specifically aim to serve a particular market niche,” says Kate Davies, executive director of The Intermediary Mortgage Lenders Association (IMLA).

“Good lenders are clear about who they can and can’t serve. There’s no point trying to pose as being all things to all consumers.”

One 5-Star winner that serves a niche is Paragon Banking Group, a lender that’s proud to have specialist teams.

“Utilising the expertise of our staff, such as our underwriters and in-house surveyors, means we can lend on some of the most complex cases,” says Richard Rowntree, managing director for mortgages.

In terms of an offering, Rowntree explains that Paragon was the first specialist lender to provide customers with the opportunity to secure a new deal six months ahead of their current mortgage reaching maturity.

Analysis by Accord Mortgages reveals that almost £100bn worth of mortgages are set to mature before the end of 2022. Rowntree believes this change has given customers some certainty, which has been well received, and that part of Paragon’s recognition is due to its diligence and prudence.

“I think our transparency is also a positive characteristic,” he adds. “Lenders should be open and communicate effectively with

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53%

of brokers said turnaround times improved significantly

22%

of brokers said lenders could improve service levels by having more BDMs or credit assessors

15%

of brokers said lenders could improve service levels by having a simpler income verification process

NOVEMBER 2022 MORTGAGE INTRODUCER

39

BUSINESS STRATEGY

SPECIAL REPORT

5-STAR LENDERS 2022

BROKER RESPONDENTS’ APPROXIMATE VOLUME OF MORTGAGES IN A YEAR

15 11 6 2 1–99 mortgages

100–600

601–4,000

4,001+

“Good lenders are clear about who they can and can’t serve. There’s no point trying to pose as being all things to all consumers” Kate Davies, IMLA brokers and their clients because both have time and money invested in the business.”

According to Sinclair, the key to standing out as a lender is consistency of offering, being in the market all the time, and being clear to brokers about how long it will take them to process cases. “[T]he lenders that stand out are those who are managing their pipeline well and have got the administration sorted out,” Sinclair says.

“It is also important that lenders manage to maintain great service standards, especially at a time when others [do] not.”

Looking at the situation from a borrower’s perspective, Davies says what matters is lenders’ willingness to go the extra mile to

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be helpful, accommodating and understanding when a customer’s circumstances change or extra support is needed.

“Being able to treat customers as individuals and make them feel valued will always be appreciated,” she says.

“Some customers will be entirely driven by price, while others will be content knowing they have got a fair deal and can rely on good service.”

Dominant trends Part of offering outstanding service requires lenders to constantly adapt and evolve their offerings in line with market conditions.

Rowntree outlines that the consecutive and anticipated further base rate rises by

MORTGAGE INTRODUCER NOVEMBER 2022

the BoE in 2022 and into 2023 means that some customers are seeking the certainty of fixed-rate products.

In October 2022, the interest rate on a typical five-year fixed-rate mortgage rose above 6% for the first time in 12 years. Meanwhile, research from BuiltPlace, a housing market website, shows rates of 6% mean that repayments on an average new mortgage will account for more than a quarter of household income, the highest burden on households since the early 1990s.

“Increases in the cost of funding mean that lenders have had to increase the rates they charge borrowers, so some customers will opt for cheaper variable rate products while they see how the market develops over the coming months,” Rowntree explains.

A sizeable consideration for lenders, given market conditions, is to still offer products which are accessible to a wide range of customers.

According to research by Mortgage Introducer, industry recruitment consultants have said that the most outstanding lenders in the market are those that seek to help consumers who may be struggling.

However, Davies warned that lenders must be careful when trying to achieve this.

“Lenders should proceed with caution, they need to ensure there are still offers available for homebuyers and those seeking to refinance existing loans, but keep business streams manageable in order to control flows of funds and maintain service levels to customers,” she says.

Responsive and attentive As market conditions continue to heat up, the speed at which a lender can progress with a customer’s application is becoming increasingly important.

“I think that lenders are being particularly responsive at the moment. Today’s rapidly changing market means we have to be,” Rowntree states. “That said, we can always do better, and responding to change provides that opportunity.”

Sinclair reiterates Rowntree’s point and highlights that lenders are being responsive to market conditions at present.

“I think with over 100 lenders in the UK,

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competition amongst them is intense for business,” he says.

As such, Sinclair explains that keeping up to date on changes to rules and regulations, as well as keeping an eye on market conditions, is essential to their success.

Davies agrees that being responsive as a lender is key, but says this can be challenging given difficult market conditions. However, she outlines that being the fastest to meet changing rules and regulations from the perspective of a lender can put them above the competition when vying for customers.

Changing ways of working Looking at how UK lenders have changed their ways of working since 2021, Davies says that the pandemic shifted much of how lenders operated but notes that a return to ‘normal’ has begun taking place. She explains that many branches were closed during lockdown, and while a large number have reopened, some customers have appreciated the shift to online operations.

Davies adds that many lenders have become used to offering mortgage interviews online and are continuing that option as some consumers find it more convenient.

As such, she says that lenders have learned to be more flexible and to use technology in an intelligent way to save time.

“I think there is also an enhanced sense of appreciation between lenders and intermediaries for how each deals with sudden and unexpected pressures on delivery,” she adds.

“Government interventions such as the payment deferral scheme and stamp duty holiday caused huge spikes in mortgage activity, not to mention the recent scramble for low fixed rates.”

Sinclair concurs with Davies that lenders have been gradually introducing new technological systems, which make the electronic submission of applications easier, among other improvements.

Sinclair believes that lenders are trying to be more flexible given the significant house price inflation in the UK. He also says that lenders have been attempting to work out different ways to assist customers in gathering deposits. This situation has

www.mortgageintroducer.com

LENDERS 2022

Barclays Website: barclays.co.uk/intermediaries Accord Mortgages Coventry Mortgages Halifax HSBC Nationwide NatWest Paragon Banking Group Santander

“We live in an age where technological changes are making our lives easier, so as lenders we should look at how we can do this for our staff, customers and industry partners” Richard Rowntree, Paragon Banking Group resulted in greater acceptance of products which can be supported with parental funding as part of this process.

However, he points out that the main difference is lenders have been trying to ensure that they are stressing the affordability at a reasonable level to guarantee that even if interest rates do go up, people can afford to stay in their house.

Rowntree believes that over the past 12

months, lenders have had to become far more attentive to market changes in order to maintain service levels.

“Business levels have remained strong, and lenders can find themselves facing an influx of business if they find their product hits best buy,” he says.

“This can impact on service levels, so the market has become more tactical over the past year.” M I

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INTERVIEW

GROWTH

“I set up my mortgage business on my kitchen table 20 years ago” Owner of family-run brokerage reveals where she thinks the market is heading

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ast month marked Pam Brown’s twentieth year as a broker in the mortgage industry, an event that coincided with another, more widely publicised episode.

Now widely viewed as ill-timed and ill-conceived, then-Chancellor Kwarteng’s controversial mini budget wreaked havoc, sending lenders scrambling for cover as they rushed to withdraw hundreds of mortgage products, while causing a major headache for brokers throughout the country.

It was no different for Brown (pictured), who had little time to celebrate her achievement. “We were absolutely stacked on Tuesday morning onwards, it was ridiculous,” she told Mortgage Introducer.

The recent cut in stamp duty – one of the few perks for first-time buyers – will not be enough to offset recent rate rises, she believes. “[Buyers] may be saving a couple of grand, but if you put that 6.5 per cent [current mortgage rate] over a five-year period, that’s a hell of a lot of money,” she pointed out.

Buyers and sellers are increasingly showing signs of jitters, about both the economy and their future financial prospects, according to Brown.

“I had a £350,000 house purchase that had been going through for the last four months and they were going to exchange tomorrow, but the person at the top of the chain said they didn’t know if they could afford it anymore and asked to have a £12,000 reduction,”

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Pam Brown

she said. “The client accepted – that was my 12 o’clock today. That’s my first [price drop], but I’ve heard of more, as I speak to lots of brokers every day,” she said, adding that an estate agent two doors away from her premises confirmed that more people had been pulling out of deals recently.

“People pull out of deals because they can’t afford their mortgage payments.

They are now thinking, ‘Hold on – should I overstretch myself?’”

Data released last week showed that the number of people accessing their pension plans – reportedly in response to the cost-of-living crisis – has recently jumped by 18 per cent.

Meanwhile, rates for two- and fiveyear fixed mortgages rose again last Friday, jumping to 6.16 per cent and 6.07 per cent respectively.

MORTGAGE INTRODUCER NOVEMBER 2022

That can only point to one thing, in Brown’s view: that property prices may eventually fall by as much as 10 per cent. It may also feel like déjà vu for Brown, who remembers some parallels with the last financial crisis in 2008.

Seven years earlier, in 2001, while working as a recruitment consultant, she had decided to switch careers.

During a fortuitous conversation with her then-mortgage broker, she explained that she needed a new job where she could work from home and still earn “a bloody good salary.”

“She suggested working as a mortgage broker, and I literally said ‘OK.’ The next week I became a trainee mortgage broker – you didn’t need to have a qualification then,” she said.

It may be coincidence that two family members have ended up working with her at the firm – her son, Joe, and daughter Nina, who deals with the protection side of the business – but the overriding impression is that it was probably planned all along.

“I never wanted five mortgage brokers who were going to do 50 grand a year; it’s never interested me. I always wanted to make sure we filled our boots, just as they are here,” she said.

Fiercely independent, Brown relies not on a bulging publicity budget, but on a far simpler – and cheaper – system to promote her business.

“Everything is word-of-mouth, and I’m beyond proud of the fact that it was me set up on my kitchen table 20 years ago, and now it’s me with my family in a three-storey building,” she said. M I www.mortgageintroducer.com

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INTERVIEW

WOMEN IN THE SECTOR

Has the mortgage industry finally become appealing to women?

The once male-dominated mortgage sector is undergoing a shakeup as a greater number of women apply for broker training, Just Mortgages’ recruitment boss Linsey Davies tells Simon Meadows

“T

he mortgage world used to be a bit of a boys’ club,” acknowledged Linsey Davies, head of talent acquisition and business support at national brokerage Just Mortgages. “But I don’t think that was unique to mortgages; I think it reflected the attitude of women working in society in general, and as that has changed, so has the mortgage world.” And so it would seem, according to figures from Just Mortgages, which show that for the first time there were more female than male applicants for its own broker academy – 60 per cent were women and 40 per cent, men.

Just Mortgages, which has brokers operating nationwide, reports that its five-times-a-year training academy is often oversubscribed, typically with more than 1,000 applicants competing for 20 available places.

Until recently the majority of them were male, but the Colchester-based company has identified a change in the profile of its applicants, following a recruitment strategy that targeted

44

those outside of the industry, sharing images on social media of a more inclusive working environment.

It seems to have struck a chord with women looking to start a new career in financial services. The number of successful female candidates increased by 180 per cent in 2021 and is on course to more than double again by the end of 2022.

“This is real change and, more importantly, it’s the new normal,” said Davies. “Women throughout our society are successful business leaders, homeowners, and professionals, and so why not mortgage and protection advisers as well?

Women contribute different skills, experience, and attitudes, and I’m in no doubt that our equal inclusion going forward means that the whole mortgage market is far greater than its individual parts.”

She explained, “We’ve worked really hard to move the image of a mortgage broker away from [it being] ‘just a man’s job,’ like so many roles in financial services have been perceived to be. Five years

MORTGAGE INTRODUCER NOVEMBER 2022

ago, men made up 60 per cent of all Just Mortgages brokers, but it’s now closer to 50-50.”

In bygone days, a trip to see a mortgage broker likely involved meeting a man, quite possibly white and suited in pinstripe. It’s a clichéd image, of course, but then clichés often have some basis in truth. Today, eight of the top 20 performing brokers employed by Just Mortgages are women. Davies, while welcoming a greater female intake, also pointed to a team that’s racially diverse, too. “Some of our most successful brokers simply do not fit what you might have imagined the profile of a mortgage broker to be 20 years ago,” she reasoned.

“Mortgage borrowers represent a massive cross-section of society, and it is fitting that so do those they go to for advice.”

Davies said there had been a conscious effort to foster an inclusive work culture.

“We work hard to create an environment within Just Mortgages where anyone can thrive and www.mortgageintroducer.com

INTERVIEW

WOMEN IN THE SECTOR

“Mortgage borrowers represent a massive crosssection of society, and it is fitting that so do those they go to for advice”

Linsey Davies

success is defined by the quality of the person and nothing else,” she explained. “Staff know that they are judged on their passion, commitment, and the quality of their work, and nothing else. There are simply no barriers to stop anyone www.mortgageintroducer.com

succeeding.” Does Davies think, though, that either men or women make better mortgage advisors?

“No, absolutely not,” she replied.

“I feel that it’s the right person for the right job in that particular office, whereby you know that team is

going to support that individual.”

Having previously outsourced its recruitment at great cost, Just Mortgages brought it in-house and launched the academy five years ago, to attract new talent to the market and award positions within the company to the most successful participants. It aimed to provide an end-to-end training solution that reached far beyond obtaining a Certificate in Mortgage Advice and Practice (CeMap), the industry-standard qualification. Catering for both novice and more experienced talent, it enabled those who had already achieved CeMap1 to join at a later stage of the course to further their skills, such as developing an understanding of the sales process, building rapport with clients, and effective questioning to understand clients’ needs. In previous years, just three out of 10 applicants were women.

A greater presence of female brokers inspired new entrants coming into the market, Davies suggested.

“Women joining the mortgage world now have a number of role models throughout the sector and can see examples of women succeeding at each and every level, from individual brokers to CEOs,” she observed.

“This removes any perception that opportunities are limited.”

Davies, who’s been with Just Mortgages for 27 years, clearly draws great satisfaction from her role.

“I love the job that I do,” she shared. “I love seeing new people come into the business, seeing them progress and knowing that we’ve supported them.” M I

NOVEMBER 2022 MORTGAGE INTRODUCER

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INTERVIEW

MARKETING

Marketing matters in a financial crisis As economic pressures build, it’s tempting for mortgage brokers to cut back on marketing – but agency boss Chris Hopwood tells Mortgage Introducer that keeping a high profile is key

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rokers shouldn’t ditch their marketing budget in a recession, even if they feel under pressure to manage their costs more tightly. That’s the advice from the head of a specialist marketing agency for the financial services industry.

Chris Hopwood, founder and managing director of FS Partnership, believes many businesses may feel under pressure to cut their costs due to a perfect storm of events, including the war in Ukraine and rising inflation and interest rates. But marketing, he said, is a vital tool in uncertain times.

“We know it’s going to be tough,” Hopwood said. “Make sure you’ve got a clear plan to work in the best and worst-case scenarios and be very fluid and flexible about adapting that. The planning process is all about actively trying to assess different scenarios and being ready to react. Whether you’re a one-man band or a large network, having a marketing plan for the next few months and the year ahead is going to be a really valuable exercise.”

Hopwood’s business offers a range of services – from developing strategic marketing plans to specialist technical writing – aimed at helping its clients to strengthen their brands and achieve growth in a sector that

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people find complicated even at the best of times.

He points to research from the Institute of Chartered Accountants in England and Wales suggesting that those businesses that invest in marketing experience more growth than those that scrap or scale back their budgets. Businesses that maintained marketing throughout the 2008 recession enjoyed three-and-ahalf times’ more brand visibility than those that didn’t, data indicates.

“Whether you’re a one-man band or a large network, having a marketing plan for the next few months and the year ahead is going to be a really valuable exercise” Further research, from Analytic Partners – an independent specialist in business measurement and optimisation – found that 60 per cent of international businesses that increased marketing investment between 2007 and 2008 enjoyed an improved ROI. “I think, probably, lots of people spend time speculating about what might happen and worry about that, rather than actually controlling the bit

MORTGAGE INTRODUCER NOVEMBER 2022

that they can do, which is putting firm plans in place,” Hopwood asserted.

“I don’t think you should be blindly optimistic, but I think if you’ve run a business and come through Brexit and the pandemic, if you’ve successfully navigated your way through that, then understand what you did well then and apply the same principles to the next year,18 months, and you should be in a good place.

“While the things that are causing the problems at the moment are very different, the effects on the economy are pretty much the same.

And so, yes, learning the lessons that you’ve learned in the past and doing the same kinds of things but better in the future is a good way to approach it.”

Hopwood advises that it is an important time for mortgage advisors to review their key messages and the positioning they have developed for their services, to ensure they remain relevant in a time of shifting priorities.

Communication is key. “I think going into an economically challenging time, everyone being active about that communication among the different channels, from lenders, to mortgage brokers, to people who are looking for a mortgage, the more active you can make it, the better it will be,” he emphasised. “You’ll be able to potentially anticipate www.mortgageintroducer.com

INTERVIEW

MARKETING

problems and do something about it before it happens rather than waiting for it to happen. If brokers feel that they’re not being heard, then definitely articulate precisely what they need for lenders to adapt their propositions. The more feedback brokers provide, the better.”

Before co-founding FS Partnership in 2014, Hopwood worked for major industry names such as Lloyds, TSB, RBS, and NatWest. “I guess the conclusion I came to is that lots of the marketing agencies supplying services to me and my teams didn’t understand the complexity of the industry and the products and weren’t able to bring it to life,” he reflected. “So my teams

“If brokers feel that they’re not being heard, then definitely articulate precisely what they need for lenders to adapt their propositions” and I often had to make amendments to the work that came in to make sure that it could get through compliance functions, to make sure that it could sell the proposition in the right way, that it understood the consumer. I felt that there was a potential gap in the market for a specialist agency. And eight years ago, I set up, and we’ve been operating ever since and growing as we go along.”

With his industry insight, would Hopwood like to hazard a guess how long the economic downturn will last? “There’s a famous quote by the American business magnate and investor Warren Buffett who said that forecasting may tell you a great deal about forecasters, but it tells you nothing about the future,” he concluded. “And I think anyone trying to predict what’s going to happen over the next one or two years, they shouldn’t have the confidence to try to predict that.” M I www.mortgageintroducer.com

Chris Hopwood

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EVENT PARTNER

MONDAY, 28 NOVEMBER 2022 • OLD BILLINGSGATE, LONDON The Mortgage Introducer Awards are back! After a hugely successful three years at the Tower of London, a very special virtual ceremony in 2020 and our biggest event to date last year at Old Billingsgate, the 2022 awards will return, in person, for a sixth consecutive year on Monday 28 November.

MORTGAGE INTRODUCER AWARDS will see the country’s leading brokers, brokerages, lenders, BDMs, and service providers recognised for their achievements throughout the past 12 months.

Be sure to reserve a table and join us this unmissable evening, where Winners and Excellence Awardees will be honoured and key members of the industry from across UK will come together to celebrate, connect and raise a glass in honour of their achievements and outstanding work.

Visit www.mortgageintroducerawards.com or contact events@keymedia.com for table reservations or sponsorship opportunities.

Mortgage Introducer and Key Media congratulate each of this year’s Excellence Awardees. To view the full list, please scan the QR code below.

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Scan the QR code to view the full list of Excellence Awardees #MIAwardsUK www.mortgageintroducerawards.com

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CELEBRATE YOUR SUCCESS! Join the highly anticipated in-person Mortgage Introducer Awards where we will reveal the big winners and celebrate the successes of the mortgage industry over an incredibly challenging year.

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LOAN INTRODUCER

SECOND CHARGE

Second charge and the upcoming consumer duty Tony Marshall CEO, Equifinance

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n a perfect world, every client for finance would experience the best outcome. To accelerate the process, consumer duty guidelines, which come into force in 2023, will urge the industry to make greater efforts toward that ideal.

Second-charge lending is already attracting greater attention from brokers as they recognise the role that this type of lending can play for clients looking to raise capital. However, with the impending consumer duty rules just around the corner, my aim, along with that of colleagues from across the sector, is to continue pressing the case for secured loans so that more brokers assess possible funding solutions with a balanced view that includes both remortgage and second-charge options.

For any broker looking seriously at a second-charge option or coming to second-charge lending for the first time, there are some choices to be made. Deal with lenders directly, enter a reciprocal arrangement with a fellow adviser versed in the market, or develop a partnership with a specialist distributor.

In the second-charge market, whilst the effectiveness of sourcing systems is still more limited, there is a greater reliance on human intervention.

Sourcing systems rely on set parameters, and while they help as a filter, nothing yet compares to the expertise of a human interface in the secondcharge sector. The need for specialist knowledge is therefore amplified.

Reciprocal arrangements with other adviser firms can work, particularly if they each have complementary areas

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of expertise. However, that relationship needs to be very strong to ensure that the client relationship remains with the introducer.

Putting myself into the shoes of a broker without access to a department to research the market, there is a free service, of which every broker can take advantage, provided by packager distributors. The best ones have access to multiple lenders, which means that they can save brokers valuable time in assessing different lenders. Also, if second charge is not my strength, they can take on the whole advice piece, leaving me free to concentrate on my core business. However, one of the most vital positives packagers bring to the party is their knowledge of the sector and the relationships they have with lenders.

The features to look for are whether your choice of packager has access to a true whole-of-market proposition, can offer a meaningful ‘no cross-sell’ agreement, and has

MORTGAGE INTRODUCER NOVEMBER 2022

the facilities and expertise to manage your clients’ cases.

As there are many packagers competing for business from brokers, it would be wise not to settle on the first one you come across. Trying different firms to see whether their service and proposition match their promises is a sensible course of action for any would-be user. Of course, nothing compares with a completely hands-on approach, with the client’s adviser in complete control of the process throughout. However, packagers provide a valuable service to many, and especially for those coming to second-charge lending for the first time.

The question is whether those relationships will need to adapt in the wake of the introduction of consumer duty, as responsibility for providing the best outcome for a client rests with the adviser. It will be interesting to see how the current transfer of advice responsibility from the original adviser to a third party will stand up to scrutiny by the regulator in the event of a complaint or issue generated by third-party advice. I expect packagers will be looking carefully at their proposition in the months leading up to consumer duty implementation.

Like many people, I have been watching the implosion in the markets caused by the government’s mini budget. While there have been many dire predictions about rising arrears and the cost of borrowing, widespread panic is not going to help. If the economists can’t agree on how the future will work out, the rest of us are unlikely to have any answers. For mortgage brokers faced with anxious clients, all they can do is continue to be professional and offer the best advice they can – but with one eye on balancing what is best for clients with their desire for new borrowing. M I www.mortgageintroducer.com

LOAN INTRODUCER

SECOND CHARGE

Tackling doubts about open banking Matt Meecham chief digital officer, Evolution Money

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uch of the buzz around open banking so far has focused on how it can speed up the mortgage application process and make it more efficient. However without borrower take-up, this means little.

We have seen strong demand for our mobile app, which incorporates open banking, since its launch earlier this year.

Yet, as the mortgage industry’s fintech journey evolves, it is inevitable that as a sector we will encounter a degree of reluctance from some borrowers, and it will be our job as lenders and advisers to reassure them.

A fear of the unknown can often be a driver when it comes to the acceptance of new concepts. While open banking has been part of the first- and secondcharge mortgage markets’ genetics for some time, to many borrowers it will be a totally new concept and something that they only encounter for the first time when speaking with an adviser.

were concerned about sharing their occupation details to obtain a quote, while a third did not want to disclose their salary. Some 45 per cent did not want to reveal their spending figures, and 40 per cent were worried about sharing their ID. When it comes to the reasons why, almost a third – 29 per cent – cited having negative experiences after sharing their data, with 30 per cent of those saying they had been called, e-mailed, and texted too often.

For those of us who deal daily with open banking, there is perhaps an assumption that borrowers will embrace it with few questions – but this is not necessarily so.

We might also find the older the demographic, the higher the reluctance. Additional research from Contact State found that when looking for equity-release or mortgage quotes, 46 per cent of over-55s went straight to their bank. The reluctance to go online stems from their concerns about who

WHY THE FEAR?

Some recent research from lead generation firm Contact State helps cast some light on the mindset of clients who might be fearful of sharing their data.

While the research does not directly relate to open banking, it offers a lot of insight into clients’ attitudes around allowing access to their data.

Out of the 5,000 adults the firm surveyed, it found that 17 per cent searched for their first mortgage online – with 31 per cent saying they would look for their second mortgage in this way.

A quarter of those it polled, however,

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MORTGAGE INTRODUCER NOVEMBER 2022

www.mortgageintroducer.com

has access to their data.

Overall, 39 per cent of over-55s are less willing to share their data online than they were five years ago, and despite the huge shift to digital financial services, 69 per cent add they would still not go online if they wanted to remortgage now.

HOW TO HELP BORROWERS

For some clients, there might be confusion between allowing access to their personal expenditure and bank accounts and disclosure of their personal information to unspecified third parties – something that open banking does not entail. Nor does it allow access to passwords and PINs. With open banking, lending institutions share a client’s information securely via application programming interfaces (APIs), which allow providers to pass on the information the client has given permission to share.

Through this, we can take an in-depth look at a borrower’s income and expenditure and automate a lot of manual tasks that can unnecessarily prolong a mortgage application.

Open banking is a matter of clients opting in and not out, so it’s important we convey to them that it is safe and, in the main, is not a case of borrowers having to disclose any more information than they would do during the course of a normal mortgage/ second-charge application.

Nevertheless, for some borrowers, agreeing to allow full access to one’s bank accounts/statements over an indefinite amount of time can be more psychologically challenging than handing over three months of paper bank statements.

In reality, allowing access to such data is ultimately beneficial to the borrower by leading to a more informed lending decision with full access to their income and expenditure. This kind of personalised approach is going to be of increasing importance as borrowers look toward more specialist solutions as some lenders in the first-charge market potentially tighten their lending criteria.

A POSITIVE STEP

Open banking is now used by between 10 and 11 per cent of digitally enabled consumers and small businesses, according to the latest Open Banking Impact Report, up from six to seven per cent the previous year.

It’s important we embrace fintech by making borrowers aware of the benefits – and comfortable with them – so they can make informed choices and have access to the best products for their needs. M I References: Open Banking Impact Report June 2022 – key insights on adoption and business use - Open Banking www.mortgageintroducer.com

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Come direct to lender Competitive rates Adverse accepted Flexible on incomes Want a common sense approach?

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NOVEMBER 2022 MORTGAGE INTRODUCER

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SPECIALIST FINANCE INTRODUCER

BUY-TO-LET

Think long-term Mark Whitear director of commercial development, Foundation Home Loans

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n a fast-paced mortgage market in which we are seeing significant changes to rates and pricing, particularly in the here and now, it is important not to lose sight of some of the longer-term issues that need to be addressed.

While we appreciate that, given the nature of today’s mortgage industry, everyone is trying to work within fast-changing parameters and perhaps second-guess what might be coming over the horizon, it is necessary to look a little farther into the future.

Indeed, you can marry up today with what may come, in the form of energy efficiency, carbon emissions, and the need to address both within the UK’s housing stock, particularly – as a priority – within the private rented sector (PRS).

While we have yet to have confirmation that all PRS properties will need to be EPC C and above from 2025/2028 onwards – for new/existing tenancies – we have to work as if this were going to happen. This will be especially pertinent for those landlords who are seeking to remortgage or purchase mortgage products right now, and they need to be made aware of how any changes will affect their ability to let these properties.

First up, for advisers who are in full education mode for clients, it’s important to understand why this is an issue. Twenty per cent of carbon emissions emanate from our housing stock, and we have the potential to reduce annual emissions by five million tonnes if all D-rated properties move to a C. This would also be a huge step toward meeting the COP26 commitment made by the UK to be net zero by 2050.

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You can therefore understand why this bill was brought forward as a means to improve the minimum EPC banding for tenants – but it has become even more important given the focus on high utility bills and the ways and means by which we can keep these down.

Many landlords may not even be aware of what the EPC rating for their property is, but you can find each one online, and this not only covers estimated energy costs, energy efficiency, and performance in preventing heat loss, but it also gives ideas on what can be done to improve the level and the potential cost.

These costings can be highly

MORTGAGE INTRODUCER NOVEMBER 2022

important, particularly within a remortgage discussion where the landlord might wish to release some capital value in order to potentially pay for any work required to make those improvements.

The four key areas to look out for in an EPC are:  Points in bands: this is the points representation of the government’s standard assessment procedure (SAP) range, a calculation based on different aspects of the property relating to energy creation, storage, or use.  Letter grade: a simple representation of which SAP band the property falls in. www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER

BUY-TO-LET  Current: the current SAP score that has been calculated on the above aspects.  Potential: the property is also assessed on where changes could be made to improve energy efficiency.

If all recommendations are put in place, this could be the new score.

Advisers will be interested to learn that the average current energy rating for properties in England and Wales is D, with a SAP score of 60. Indeed, 51.5 per cent of all properties nationally are rated D or E, indicating that any new regulation designed to improve this to a C will eventually affect more than half of all property owners, including landlords.

This is why the buy-to-let market has become so vocal in this area, and why advisers are now increasingly able to access more green BTL products – such as we offer at Foundation – in order to support landlords not just in

www.mortgageintroducer.com

improving their properties, but also in purchasing those already at a C rating.

The big message here, though, is around securing the improvement that will be required for all properties currently below a C rating. Now, for some properties the score can be improved upon with some very simple and cheap solutions – such as installing energy-efficient lightbulbs or thermostatic radiator valves.

But for others, the improvements will need to be much more substantial in scale and cost. There are eight categories into which EPC rating improvements fall: loft insulation, wall insulation, glazing, draught-proofing, lighting, heating systems, renewables, and secondary heating systems.

Estimates have suggested that 48 per cent of homes could potentially benefit from a lower-cost measure such as loft insulation, cavity wall insulation, and hot water cylinder insulation. The rest would benefit from a higher-cost measure, such as solar photovoltaic cells,

which would add over 10 SAP points but could cost more than £3,500.

The English housing survey states that 97 per cent of rental stock could be improved to band C at an average cost of £7,646. For those landlords who have multiple properties within a portfolio, that could undoubtedly add up for those homes that are currently below C; however, with advisers working through the finance options and using some of the equity that is likely to have grown in recent years, landlords can get on top of this and get their entire portfolio in a position to meet huge tenant demand both now and for the long-term.

Working with lenders like Foundation, and accessing our green product range and the information we have in this area, can help advisers and their clients to meet both their short-term finance needs and their long-term property responsibilities. The best time to have that conversation is right now. MI

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SPECIALIST FINANCE INTRODUCER

BUY-TO-LET

All change!

Steve Cox chief commercial officer, Fleet Mortgages

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ow best to sum up the recent period within the mortgage market? It has been eventful, to put it mildly, and I can’t help but reflect that the market turbulence has been somewhat difficult to get our collective heads ‘round.

First, though, a word of warning regarding this article. As is the nature of writing for editorial deadlines, this piece is written far in advance of the time you will actually get to see it. That makes it incredibly difficult to write, because I am effectively trying to second-guess what will happen over the course of the next three to four weeks.

We work in a fast-paced market at the best of times, and, as has been shown all too starkly lately, that pace of change can render even the most nailed-down certainties completely redundant.

So forgive me, but I will try to stick to generalities and won’t venture to predict what might happen between now and the time you read this.

Certainly, from both a political and economic point of view, I’m fully expecting a lot of water to have flown under the bridge by the time you get the magazine in your hands.

However, back to the here and now – at least what it is for me in this moment.

The new chancellor, Kwasi Kwarteng, has just announced a decision not to take forward the scrapping of the 45p rate of tax, which leaves me wondering just what measures of his mini budget will actually become law.

It is clearly apparent that the ‘new’ government got this wrong, and the markets – and by the looks of it, backbench Conservative MPs – decided that these measures could not continue to live once they touched the reality of most people’s lives.

Moving on to our mortgage

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market, it is also apparent just what considerable short-term change this has catalysed. Let’s, however, begin this by acknowledging the great universal truth: the market had always anticipated rates going up over the course of the next 12 months.

However, what has clearly knocked the market sideways is how dramatically and quickly the anticipation of what rates might be in the future changed. We went from an anticipated rise in the bank base rate to 3.5 or 4 per cent within a year to closer to six per cent (in a much shorter period), and given this, it is no wonder that mortgage lenders were left in a situation where they had to pull rates and products while they attempted to get their collective heads around what rate they should be pricing at.

Again, as I write, across all sectors of the mortgage space lenders are slowly coming back to market, but the rate differential between what was available just a couple of weeks ago and what is here now is significant. It is no wonder that we have seen considerable (payment) shockwaves from both existing and would-be borrowers as they face up to the new rate reality, and what that might mean for their monthly payments.

Quite frankly, no-one would have believed we would get to these rates in anywhere near this timescale – over the course of days, rather than weeks or months – so it is no wonder that advisers have been left holding the baby, attempting to find solutions for those who are understandably horrified at the increase, or potential increase, in their monthly mortgage payments.

Again, by the time you read this, I would hope we will have seen something like a semblance of normality returning to the market, but – from a price perspective – it at least looks likely we will see some considerable short-term pain before we can begin to move forward on firmer footing.

Certainly, in the buy-to-let space, we have seen a similar reaction to that

MORTGAGE INTRODUCER NOVEMBER 2022

Quite frankly, no-one would have believed we would get to these rates in anywhere near this timescale – over the course of days, rather than weeks or months – so it is no wonder that advisers have been left holding the baby of residential peers in that fixed-rate mortgages were the first to go while we ascertained at what level we could continue to lend. However, from Fleet’s point of view, we have been able to continue offering a number of tracker products at competitive rates, while looking at what our wider product range might contain when we bring this back to market.

Undoubtedly we have seen a significant cut in the number of mortgage products available, both residential and buy-to-let, but we should continue to stress that this is not because lenders lack appetite to lend. Far from it. We want to lend, but have to be absolutely certain of the price at which we can do it.

I appreciate that this has not made the lives of advisers – or their clients – particularly easy. And I doff my cap to the adviser profession. I can only imagine what you have been going through in recent weeks, and I’m sure that without professional mortgage advice, the situation would have been 100 times worse for many people.

We, however, remain utterly committed to the intermediary space, and it is my sincere hope that by the time you read this, a lot of the upheaval will have been eased, and we will begin to resemble a more normal market again, with plenty of new products and rates that provide clients not only with the mortgage finance they need, but at a price they can live with. M I www.mortgageintroducer.com

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If you do not have professional experience, you should not rely on the information contained in this communication. If you are a professional and you reproduce any part of the information contained in this communication, to be used with or to advise private clients, you must ensure it conforms to the Financial Conduct Authority’s advising and selling rules. This information is correct as of August 2022 and is relevant to Halifax products and services only. Halifax is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628