11 minute read
Specialist Finance Introducer
UK holiday lets still a shrewd investment
Emily Smith
head of intermediary sales & distribution, Harpenden Building Society
With the holiday season in full swing, here’s a timely reminder to mortgage intermediaries to consider the opportunities created through UK holiday-let financing. The demand for mortgages in this specialist area is as strong as ever.
Despite people being able to travel more widely than at any time since the pandemic first struck, the travel industry is still reeling from the effects of COVID-19. Overseas travel is difficult. As a result, a boom in holidaying at home and the ongoing demand for good-quality staycation accommodation remains. In the coming months, we expect a steady stream of holiday-let mortgage applications. It remains a popular option with investors wanting to make the most of the situation.
THE BACKGROUND
When COVID finally became more manageable, the consensus was that we would be able to travel easily again, whenever we wanted to and as we had done prior to the pandemic. Although this has been the case to some extent, overseas travel has been far from easy in 2022 – a situation that looks set to remain for some time. Whether it’s flight cancellations or delays in passports renewals, it’s a hassle, putting many people off. The obvious solution has been to holiday closer to home, and this is what’s been happening during this peak holiday season.
STAYCATION POPULARITY
According to PwC research, 37 per cent of UK residents plan to travel locally in 2022, creating significant demand for holiday lets and thus allowing investors to maximise rental income as demand outstrips supply in British holiday hotspots. 2022 research from Park Leisure also found that over two-thirds of the people they interviewed (70 per cent) agreed they would rather take smaller regular trips in the UK than one big holiday, again pushing up demand for domestic holidays. When asked their reasons for preferring UK breaks to overseas travel, respondents cited less travel time to the destination, followed by reconnecting with nature and the great outdoors. The increasing number of people buying pets during lockdown has also influenced current holidaying trends. The ability to bring pets along on holiday was a huge pull toward staycations, with almost a quarter of Brits (24 per cent) citing it a as reason to consider taking more regular UK holidays.
SURGE IN DEMAND FOR UK HOLIDAY-LET MORTGAGES
With such demand for what we now term staycation breaks, investors are seizing the opportunity to acquire holiday-let property to rent out, providing a stream of financing opportunities for both lenders and brokers. We have many years of experience to compare and contrast in this specialist area of lending and this is a bumper year for holiday-let mortgage applications!
HARPENDEN’S APPROACH
Harpenden’s specialist holiday-let product range is not only price-competitive but also has some interesting features. Additionally, there are no restrictions on location for the property purchase, giving wider buying options within England and Wales, whether it be in a coastal, rural, or city-centre location. We also recognise that investing in a holiday let is not just about the money. As such, we have included an additional feature that allows owners to enjoy their holiday-let properties themselves for up to 90 days per year. Loans of up to £2m are available; Airbnb rentals are accepted; personal income can be used if required to support the loan (top-slicing); up to three properties on one title will be considered; properties above commercial premises are also accepted; and we have 75 per cent LTV available on IO and 80 per cent available on repayment.
In our experience, holiday-let purchases are often made by customers with multiple forms of income from a range of sources. Mainstream retail lenders assessing mortgage applications can’t always accommodate customers with complex income. Applications assessed en masse by an algorithm, a popular assessment tool used in isolation by many larger lenders, can be rejected at the first step for those customers with a non-standard financial profile. At Harpenden we, and some other specialist lenders, manually underwrite every mortgage application, helping us to take a considered view – to assess the risk in more detail and to look at the wider picture. We want to say yes – and with the benefit of manual underwriting, a complex holiday-let mortgage application can often proceed.
The holiday-let market remains strong, with opportunities to secure favourable rental yields. For those of you with customers looking to invest in holiday-let properties, a specialist lender like us will be delighted to discuss the options with you. M I
Keeping pace with scrutiny
Stuart Wilson
CEO, Air Group
At a recent “Breakfast with Stuart” meeting we began discussing what lenders and providers might require from later-life advisers in future, particularly in light of the Consumer Duty rules, which may well have been published by the time you read this.
It was – and is – my belief that lenders will begin to want far more oversight of intermediary advice decisions in the later-life space, particularly in equity release. And if lenders and providers are urged to take more responsibility in this area, this will have implications for advisers.
But what might this truly mean in practice? To what extent could lenders and providers be held responsible for the advice provided by intermediaries? Is this even desirable? After all, back in the early days before statutory regulation of residential mortgage lending, the great debate was around lender responsibility for advice, and it was determined this was not an avenue worth pursuing.
Instead, advisers were – quite rightly – deemed to be responsible for the advice they provided and had to supply evidence to support their recommendations. Will the Consumer Duty shift this somewhat, or is it merely reaffirming the central and pivotal role of the adviser in the process, with the lender/provider offering the necessary backup to those recommendations?
As this is written prior to the final publication of the Consumer Duty rules, it is difficult to give a view; however, I certainly believe lenders and providers are going to take a much greater level of interest in those who advise on their products and in the quality of that advice.
For advisers, what does this mean? Well, again, you might rightly argue that the adviser community has always been able to evidence why a recommendation was provided, and that they are used to taking into account all manner of factors, not least the potential vulnerability of customers, particularly during a period when, for example, their income levels are under greater strain.
All well and good, but if we move back to the Consumer Duty rules the likelihood is that these requirements are going to be ramped up considerably, and, of course, will need to be implemented by adviser firms operating in all sectors, not just later-life lending/ equity release.
To my mind, the focus on quality of advice will be paramount, and lenders/providers are going to need to satisfy themselves regarding, and be confident in, the quality of those who are selling their products. In order to maintain that quality, you have to maintain standards and processes, but you also have to maintain your training and competence, in order to continue to prove both you and the advice you give are fit for purpose.
One of my major bugbears over the years has been the ease with which advisers can, for example, secure their equity-release qualification. Because the fact of the matter is that the real work and learning only start when you start doing the job. The analogy is passing your driving test – it’s only after the test that you truly learn, securing the skills of driving through experience and becoming ‘roadworthy’ over time.
In this new era and environment, the focus has to be on maintaining and improving skills and standards through ongoing T&C work, ongoing CPD, lifelong learning and the like. It’s why we recently rebranded our Air Academy online training programme for later-life advisers with eight new modules that cover a range of key areas.
Once those modules are completed, advisers and firms can display a unique Accredited Later Life Lending Professional badge in order to promote their credentials and as a signal of ongoing intent to maintain standards, to keep learning, and to do everything they can to get the best outcomes for consumers. This is also fully aligned with the Equity Release Council’s competency framework and accredited by the London Institute of Banking and Finance.
It seems clear that the ability to prove competency regularly – not just at the point of passing an exam – and to satisfy both the regulator and lenders/providers is going to play an even bigger role for advisers in securing their place in this sector.
As always, documentation and evidence of this are going to be paramount; it won’t be anywhere near good enough to say you’ve done it – you’re going to need to prove it and show that you are continuing to do it on a regular basis. This sector does not stand still, and keeping up with those ongoing changes, and showing how you are doing so and the benefits it brings to your proposition and clients, is thus vital.
We know advisers have all the capabilities to do this, and have been doing so for some time. But now more than ever it will be about documenting and proving what you have done and the standards you set. Air will be here to help you do that, and much more, at every step of the way. M I
Updating the profile of FIBA
Adam Tyler
executive chairman, FIBA Ltd
Over the last two years and more, FIBA has been able to expand the number of benefits we can offer our members. Along with the number of lender partners, we will be adding two new banks specifically for access by FIBA membership. We have been able to do this and encompass all these elements in the Specialist Property Finance Club, which gives all our members the opportunity to benefit from those unique arrangements and enhanced terms, alongside exclusive access to specialist lenders and their products that previously may have not been readily available to individual firms.
One of my own personal criteria and something that is vitally important is that we set our monthly fee at a level that reflects an association that is affordable whilst also being creative in the specialist property finance market. We are committed to maintaining this, and now, in our fifth year, I am pleased to say we have made only one change in that time to the cost of subscription, as well as offering all FIBA firms membership support during the pandemic.
As we move into the second half of 2022, and following on from the very successful FIBA annual conference, I am now in planning for our specialist property finance summit in London in October. This will allow us to discuss across the industry what lies ahead in the market; it helps us plan our support for you as members and, more broadly, for the specialist property finance sector as a whole.
As part of the work of this notfor-profit specialist trade body, we are committed to providing best-ofbreed support through our panels of lender and professional partners. With that in mind, we are in the process of onboarding a series of banks and specialist lenders as FIBA partners to expand that remit. The Specialist Property Finance Club is growing and aiming to enable further easier access to more specialist property finance products for FIBA members; it is due to be relaunched on 1 September.
One of our major commitments for 2022 and into 2023 is the Industry Education Programme, in conjunction with the London Institute of Banking and Finance. This has been and will continue to be a huge piece of work for FIBA on behalf of the industry and, on completion, will benefit everyone. The support from all sectors, including the high street banks and every lender in the market, has been unparalleled. A draft framework document has now been agreed, covering all the areas in a range of modules that make up specialist property finance. Once completed, this will give any candidates an insight into what is required to work in and be part of our industry. It has taken nearly a year to reach this point, but the commitment of all communities has now made it possible, and production of the final programme has begun in earnest.
There has been a huge investment of time and resources over a number of years to provide our members with access to an increasing range of lenders and increasing benefits from FIBA, as well as to the wider group benefits that SimplyBiz offers. This is a unique combination, with FIBA supporting those involved in other forms of property finance alongside those involved in residential mortgages.
We want as many broking firms as possible to take advantage of the many benefits available through the organisation that we have created over the last four and a half years. We are dedicated to creating opportunities for market understanding and professional development, and to supporting business growth in specialist property finance. We are committed to bringing an ever-growing range of unique and exclusive services to FIBA membership. Let’s look forward to a rewarding second half of 2022 for all of our businesses. M I
