MORTGAGE INTRODUCER Champion of the Mortgage Professional www.mortgageintroducer.com September 2022 £5 CHANGING THE RULES: WHAT’S THE IMPACT? Discussing the vagaries of the IR35 Top Mortgage Employers 2022 Interviews Loan Introducer Supporting confident remortgages Find out more inside
Managing Editor
EDITORIAL
MORTGAGE PROFESSIONAL AUSTRALIA claire.tan@keymedia.com
The good news, however, is that the mortgage industry remains a community even in stressful times. The incident prompted mortgage professionals to send messages of support to Hall and Saffron’s employees on LinkedIn, with a large number of them going as far as to suggest the offending brokers should be struck off the lender’s panel.
After a period in which the housing market had grown seemingly without any brakes or boundaries, brokers are having to deal with lenders rapidly changing rates, pulling products , and adjusting service level agreements as they try to balance their books. Indeed, the pressure is beginning to take its toll.
And that, perhaps is the key – we are all in this together. So, remain calm amid the storm. As Kelly Wicks, technical director at Kinleigh Folkard & Hayward, put it, “A little kindness, a little consideration and some honest to goodness joined up thinking about how we all affect each other is all it takes.”
Monica Lalisan
client and the estate agent behind them. We’re all annoyed when we don’t get the service that we expect, but we’ve seen abuse ramp up to a point where I wanted to say to people ‘ L ook, just be kind; consider who you’re talking to , ’” he said.
he country is in the midst of a crisis. With energy prices spiralling, inflation soaring, interest rates climbing, and both wages and benefits struggling to keep pace, poverty in the world’s fifth largest economy is now a stark reality.
Even for those lucky enough to be relatively comfortable financially, there is still a toll. Restaurant owners, for example, will see fewer people through their doors, beauty parlour managers will note a drop in people’s disposable incomes, and, yes, for mortgage brokers , too, the pressure is high.
Loiza Razon
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According to Tony Hall, head of mortgages at Saffron, in a recent interview with Mortgage Introducer online, a small minority of brokers shouted at staff over the phone and sent abusive emails after the lender decided to raise its service level agreements (SLAs) from 18 to 24 days.
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Alan Jones, mortgage adviser at the Mortgage Advice Bureau, posted a lengthy message, saying the abuse was “totally outrageous”, while pointing out that “these are tough times for everyone” in the industry.
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WHAT’S INSIDE MAGAZINE Contents 5 Market review 12 Advice review 13 London review 14 Recruitment review 16 Technology review 20 Protection review 22 Buy-to-let review 26 General Insurance review 28 Later life review 29 Equity release review 30 Conveyancing review 32 Cover: Round table The enigma of the IR35 38 Feature: Will the scrapping of the BoE’s affordability test matter? 40 Interview: Kettel Homes Shaking up rent-to-own 42 Interview: Tink Giving the self-employed access to more 44 Interview: Aldermore Bank Attracting and retaining clients 46 Interview: ApprenticeshipsInvestecandthe sector’s need for new talent 48 Interview: TAB Uncertainty in UK property markets 49 Special report: Mortgage Introducer recognises the industry’s leading lights 56 Loan Introducer The latest from the second-charge market 59 Specialist Finance Introducer Notes on buy-to-let, later-life lending, and FIBA MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com2 Special report 06 49 64 Going green FIBA update Consolidation58ishot
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Earlier indications of this emerged in the latest Bank of England Money and Credit statistics, which showed that residential mortgage approvals decreased to 63,700 in June from 65,700 in May. This figure is also below the 12-month pre-pandemic average up to February 2020 of 66,700.
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In addition, net borrowing of mort gage debt by individuals decreased to £5.3 billion from £8.0 billion in May, although this remains above the pre-pandemic average of £4.3 billion. Gross lending decreased to £25.4 billion in June from £28.1 billion in May, and gross repayments decreased slightly to £20.3 billion from £21.2 billion. The data also showed that the average inter est rate paid on newly drawn mortgages increased by 20 basis points to 2.15 per cent in June.
Turning our attention back to the purchase market, data from Legal & General’s SmartrCriteria tool for June suggested that family members continue to play a key role in helping first-time buyers onto the property ladder. ‘Firsttime buyer/first-time landlord/nonowner occupier’ was the third-mostused criteria point, while ‘joint borrower sole proprietor’ took the fifth spot. Despite wider economic pressure, the number of searches for guarantor/fam ily assist mortgages and gifted equity/ concessionary purchase mortgages both remained comparable to May (dropping by one per cent and rising by 0.4 per centAsrespectively).alenderwho has been a prominent figure in the intergenerational lending space for many years, I think it’s good to see the spotlight being shone on this area, as an ever-growing number of borrowers are seeking financial support from family members to help with a variety of property purchases. And with many variations of this product type on offer, it’s important for advisers to be aware of the full intergenerational lending spectrum so they can help even
more borrowers to benefit from this financial backing and achieve their homeownership aspirations.
he summer of 2022 is well and truly here, and the mortgage market continues to defy expectations in terms of both the volume of activity and the strength of demand, especially amongst homemovers. Having said that, the purchase market is expected to slow in the coming weeks as mounting living costs, inflation reaching a 40-year high, affordability concerns, and rising interest rates are likely to generate increased consumer caution.
GROWING REMORTGAGE PIPELINES
Even though this has been far from negative so far, I always like to finish on a particularly positive note, and there’s nothing more positive for the housing and mortgage market than confidence. With that in mind, let’s close with the stat that over two-thirds of property professionals (64 per cent) were reported to be somewhat or very confident about their business prospects over the next 12 months. This figure emerged from a Countrywide Surveying Services poll of lenders, brokers, surveyors, and other property professionals.
THE SUPPORT INTERGENERATIONALOF LENDING
I can’t argue with any of these percentages, and they serve nicely to remind us of the challenges ahead. These challenges, however, continue to be tempered by the sustained levels of positivity and confidence on show throughout the industry thanks to a highly robust housing market and a competitive lending marketplace.
Craig Calder director of mortgages, Barclays
The news is good
When it came to the biggest drivers influencing the market, half of respon dents (50 per cent) indicated that the cost of living would be the biggest driv er. Higher interest rates captured over a third of the votes (36 per cent), general economic uncertainty accounted for 15 per cent, consumer confidence 14 per cent, increased taxation six per cent, and all of the above came in at 34 per cent.
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Let’s just clarify that there are no huge surprises here, especially in light of the aforementioned factors – and it’s prudent to point out that we continue to see sustained interest from firsttime buyers and existing homeowners
BUSINESS CONFIDENCE
looking to take their next step onto the property ladder. Remortgage pipelines are also growing, providing a wealth of opportunities for intermediaries. This was highlighted in data from LMS, also for June, which saw pipeline cases increase by 10 per cent month-onmonth – the biggest increase since the start of 2022 – as more consumers turn to remortgaging to offset their cost-oflivingBreakingstruggles.down the reasoning behind this, 52 per cent of remortgage borrow ers increased their loan size in June, and 67 per cent took out a five-year fixed rate. Thirty per cent said their main aim when remortgaging was to lower their monthly payments, the most popular response. The data also suggested that instructions are expected to pick up further over the summer months.
RESIDENTIAL MORTGAGE APPROVALS
Grant Hendry director of Foundationsales,Home Loans
EPCs play a critical role in identifying good and bad green credentials within individual properties and in allowing buyers to make an informed decision about what to do with this data.
Lenders and advisers also have a major role to play in the energy effi ciency conversation. Here at Foundation Home Loans, we are always looking to play an active role in the education process and in raising awareness around green mortgages. We do this by taking a proactive approach to this type of lending in both the residential and buy-to-let sectors, and by delivering a range of green solutions for purchase and remortgage purposes.
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On the topic of awareness, it was highly encouraging to see that over nine in 10 landlords are aware of the new EPC ‘C’ legislation, according to Q2 2022 BVA BDRC Landlord PanelFromresearch.apurchase perspective, it’s clear that EPC ratings are having an impact for landlords looking to increase their portfolios. The BDRC research found that, of the landlords intending to buy this year, the majority (63 per cent) are specifically aiming for A-to-C-rated properties, while 24 per cent are looking to purchase D-to-E-rated properties. Only two per cent were reported to be specifically looking to purchase a prop erty with an EPC rating of F or G.
he topic of properties’ green credentials is now at the forefront of a host of property-related discussions, and a major component of these conversations is the Energy Performance Certificate (EPC).
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Green credentials, EPCs, and the importance of positive change
For landlords, and for interme diary partners servicing the needs of such clients, a vital role within this is maintaining a strong grasp of effi ciency requirements and awareness of new legislation.
A requirement to have an EPC was then gradually extended to all build ings, both commercial and domestic.
Later down the line, in May 2010, the government changed the legal require ment for a HIP, but EPCs remained an integral and compulsory element in the renting or sale of a property, and this remains the case.
This is according to a new report from Rightmove, which also outlined that four in ten homeowners (41 per cent) have already made changes to improve their homes; for the remaining 59 per cent, the biggest reasons for not doing so were that they don’t feel they need to make improvements (40 per cent), or that the improvements are too expensive to make (33 per cent). The overwhelm ingly biggest motivator for improve ments was to reduce energy bills. Sellers who have already made changes that have improved the EPC rating of their homes are pocketing as much as 16 per cent more, on average, when selling.
These represent some enlightening figures and certainly help demonstrate just how prominently energy effi ciency sits in the thought process of homeowners, landlords, and tenants. This is in sharp contrast to times gone by and represents a trend that will become even more apparent as energy prices escalate further and when it comes to shifting attitudes toward the UK’s drive to hit Net Zero.
In the residential market, buyers are reported to be more likely to try to nego
The study analysed over 200,000 homes listed on Rightmove that had sold twice, with an improved EPC rating the second time. Those who had upgraded their rating from an F to a C added an average of 16 per cent to the price achieved by their home. Moving from an E rating to a C rating banked sellers an extra eight per cent on average, and moving from a D to a C resulted in an average of four per cent more.
Believe it or not, 1 August 2022 marked the fifteenth anniversary of the EPC in England and Wales. These were first introduced back in 2007 as a result of EU directives around the energy performance of buildings, and played a key role in the integration of the Home Information Pack (HIP), a pack that was initially provided by those selling prop erties with four bedrooms or more.
tiate asking-price discounts to factor in the cost of making green improvements in the next ten years.
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The mortgage market will continue to play a central role in this progres sion, and lenders who are active and innovative in this space will lead the way in driving positive change in the mindset of intermediaries and borrowers – positive change that will benefit all generations.
QualifiedReadycustomerstogo! • Real time leads (FCA regulated) • See lead information before you buy • Pay as you go • Get started for as little as £200 • Zero lead cost with revenue share option • Lead Management System • User Management System • Credit report provided with 90% of leads • Leads qualified by UK advisors • No monthly fees • Notifications for leads that suit you • Contact State Certificate of Authenticity Yourportalpersonalisediswaiting The Giving Mortgages Broker Portal delivers a high volume of quality new customers to Mortgage Brokers In the past three weeks I have purchased 22 leads and secured 6 mortgage sales and 5 insurance sales giving me an income of around £11,000 for a £520 investment — Alan from Crieff Financialbroker.givingmortgages.co.uk Giving Mortgages is an Introducer Appointed Representative of The UK Mortgage Centre Group, who are authorised and Regulated by the Financial Conduct Authority - FRN: 826982 The leads are genuine, real time and of a good quality. More importantly the conversion rates are exceeding our expectations. — Paul from Friends Capital Scan with camera+ much, much more!
self-employed earners in the UK chimes with what we see. Many cannot take on extra work to pay for higher energy bills and more expensive food and clothes; they are relying on universal credit due to age, infirmity, disability, or because, increasingly, they have no option but to be full-time carers.
We all know the UK population is ageing, and with modern medicine improving life expectancies, it’s no surprise that the 2021 census showed
This leaves lenders with a choice. Do we keep applying the old rules? Or do we choose to recognise that today’s world is not the world of 10 years ago? As lenders, we can empower our underwriters to be flexible and make common-sense decisions when computers might otherwise say no.
Economic change on the scale we are seeing today changes people – their priorities and their behaviour.
1 https://www.gov.uk/government/publica gland-and-wales-census-2021wales/population-and-household-estimates-entions/census-2021-first-results-england-and2 https://www.ons.gov.uk/peoplepopulation andcommunity/populationandmigration/ populationestimates/bulletins/population andhouseholdestimatesenglandandwales/ 3census2021 july2022demployeetypes/bulletins/uklabourmarket/labourmarket/peopleinwork/employmentanhttps://www.ons.gov.uk/employmentand
July’s Labour Force Survey estimates for March to May 20223 are interesting to consider alongside this backdrop. Overall UK employment rose to 75.9 per cent, but is still below pre-pandemic levels.
The 2021 census figures show the size of the usual resident popula tion was 56,489,800 in England and 3,107,500 in Wales – the largest popu lation in this jurisdiction on record, with over 3.5 million more people living in England and Wales than there were in 2011.
Meanwhile, ONS figures published separately show the number of new homes completed over the same time frame was just 1.5 million, taking the total number of households in England and Wales to just shy of 24 million.2 While the detailed figures recording the average number of people living within a household won’t be published until the autumn, even this first round of high-level data is informative, particu larly for our sector.
very 10 years, the UK government carries out a census to take a snapshot of the population – a record of demographic trends across the country that is used to help government comprehend and develop social policy.
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I know what all those who work so diligently to support our customers at Newcastle Building Society choose, and what I choose myself: to help people make the best financial decisions they can by taking the time to understand who they are. M I
The most recent was conducted on 21 March 2021,1 and its first datasets were published at the end of June this year, with Scotland and Northern Ireland’s data separate from England andTheWales.initial analyses undertaken by the Office for National Statistics (ONS) reveal how British society has changed over the past decade –and, indeed, how it continues to change.
REVIEW MARKET
Stuart Miller chief customer officer, Newcastle Building Society
there were more people than ever in the older age groups. According to the data, the proportion of the population aged 65 years and over last March was 18.6 per cent, up from 16.4 per cent in 2011.
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We are facing a toxic cocktail – more people over 65, more people struggling to make ends meet – and all the while, house prices and rents continue to soar.
But there are also many people who, seeing their standard of living sliding, are reviewing their current working patterns. This may be parents taking time off work to care for children, it may be children needing time off work to care for parents. It may be those already in retirement, whose rather meagre rise in state pension in April has prompted them to take on some paid employment.
It’s my view that the July labour statistics indicate something’s got to give – the rise in the number of part-time
Our economy is changing fast, and lenders must adapt
The number of part-time employees increased during the latest three-month period, continuing to show a recovery from the large falls in the early stages of the coronavirus pandemic. And though the number of self-employed workers fell during the pandemic and has remained low, that number is now starting to pick back up, driven by more people becoming part-time self-employed.Inthemortgage market, we have the privilege of a granular insight into the context of these aggregated data trends. Assessing affordability, helping clients to present their income and creditwor thiness in the best light possible, and having to deliver the news no hopeful borrower wants to hear – mortgage declined – give brokers and lenders a very real and immediate sense of how people across the country are faring.
Inflation running over nine per cent at a time when interest rates are rising –with the Bank of England being all but explicit about its intention to continue along that path – has begun to affect family finances visibly now. Even with the government’s cost-of-living payments for those struggling the most, people are getting poorer.
At the white paper’s launch Mr Gove said, “Most people want to buy their own home one day and we are firmly committed to helping Generation Rent become Generation Buy. We must reduce financial insecu rities that prevent renters progressing on the path to home ownership and, in the meantime, renters should have a positive housing experience.”
In addition to the lost rental income, the survey suggested that most landlords expect the improvements to cost on average £5,900, but just a third currently have the necessary funds available to pay for the proposed changes.
The English Housing Survey 2020 to 2021 shows that currently, 21 per cent of homes in the private rented sector are
Thenon-decent.sectorhas the highest preva lence of Category 1 hazards – those that present the highest risk of serious harm or death. In 2020, 12 per cent of private rented properties had such hazards, compared to 10 per cent in the owner-occupied sector and five per cent in the social rented sector.
It comes as private landlords are already facing several years of major change driven by the government’s net-zero targets. Where new tenancies commence from 2025, properties rented privately – either to local authorities or to individuals – must have an energy performance certificate (EPC) effi ciency rating of band C or above.
A housing market that provides homes that work for those living in them is clearly what we should be aiming for, and it feels reasonably likely that we are slowly moving down that path. It presents an opportunity – perhaps for first-time buyers, but also for developers – to improve the quality of that older, unwanted stock. Not only would it improve the quality of security on lenders’ balance sheets, but it would also increase supply at a time when it is really needed.
Of course, we will need to scruti nise and ensure those changes and upgrades are affordable and made –that’s what we are here for – and this drive to improve the quality of our rented stock could represent a significant boost to the available housing stock if we can find a way to enable the opportunity.
andlords in the buy-to-let sector at the moment might agree with the title of this article in theory, but given just how much change they’ve been subjected to over the past seven years, I’d understand the statement being met with some cynicism.
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The number of properties avail able to rent through letting agents in March has halved in three years, according to figures collated by Propertymark. Its survey of 443 agents representing 4,000 UK lettings branches found that 94 per cent of landlords who removed their proper ties from the rental market did so to sell them. More than half of the rental properties sold in March this year alone did not return to the private rentedLargemarket.corporate and institutional investor landlords have been buying into the private rented sector for some years now, with companies such as John Lewis, Lloyds Banking Group, and Legal & General all becoming landlords. By far the most popular tenancy group focused on to date by
Steve Goodall e.survMD,
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Tax relief withdrawal, fire and health and safety regulation, additional stamp duty, tougher affordability rules imposed on banks by the Bank of England – it has been relentless as the government has pursued its objective of improving the private rented sector and helping more renters to become homeowners.
per cent of landlords won’t be starting work for up to four years, cutting it close to the proposed 2025 deadline.
It’s a significant proportion who need to. Close to a quarter (23 per cent) of landlords said their properties are currently rated D or below for energy efficiency, so they may be unable to begin a new tenancy from 2025 unless improvements are made. A further 27 per cent of landlords surveyed admitted to not knowing the energy efficiency rating of their properties. In some cases, landlords said they knew the EPC rating for only some, not all, of their rental properties.
Research published in July by Shawbrook Bank found that 30 per cent of landlords they surveyed have not yet made any energy-efficiency improvements to their properties. Two in five landlords (42 per cent) claimed their tenants would need to vacate their properties for improvements to be made, at a cost of £5,000 in lost rent, while 10
It’s just beginning to hit home how seismic a change this is going to be for the private rented sector.
In its latest statement on the sector, Michael Gove, secretary of state for the Department of Levelling Up, Housing and Communities, unveiled a policy paper entitled A fairer private rented sector in June. It proposed a 12-point plan to tighten up regulation, which it believes will improve standards for both tenants and landlords.
With change comes opportunity
The market is expecting this shift to continue – more small-time landlords to sell up and more institutional money to fund purpose-built rental stock.
Shawbrook calculates that landlords could lose up to £9,500 a year if they are unable to make changes to the energy efficiency of their properties ahead of the EPC regulation changes.
The prospect of such significant change, increased regulatory responsibility and scrutiny, and the sizeable investment costs has already pushed some landlords out of the market altogether.
these investors has been high-quality student accommodation and, to a lesser extent, housing for young professionals or adults living in care.
What happens to the homes sold out of the market, then?
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Heating and powering buildings currently make up 40 per cent of the UK’s total energy use, and the latest government figures show 54 per cent of homes in England are still rated D or below for energy efficiency.
or more than two decades, the evolution of financial services has been shaped by regulation.
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Knowledge is critical to getting right balance on duty of care to customers and environment
M-Day, the Consumer Credit Act, Mortgage Market Review, Mortgage Credit Directive, Basel regimes, Solvency II, Retail Distribution Review, and, most recently, the Financial Conduct Authority’s consumer duty legislation.
will become harder still.
The obvious question is how one does this. Ultimately the answer to this must start with data. Knowledge about both the property and borrower is the only way to bake green compliance and consumer-duty rules into lending policy and practice. Access to this data is also going to be necessary to compile financial results and performance assessments, making funding availability contingent on evidence of compliance.
For the best part of the two decades of regulation this market has lived through, I do not think nearly enough investment has been made in creating IT knowledge bases fit for the present, let alone the future.
The problem facing the majority of mortgage lenders, both residential and buy-to-let, is that legacy IT systems, coupled with historical cobbling together of different approaches to data records and storage, make this critical knowledge virtually impossible to get at in a meaningful way.
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First, let’s talk about the next wave of regulation coming our way. For once, it’s not about protecting customers or consumers, and it’s not coming from our friends in Stratford. The green agenda has been top priority for successive governments since Theresa May signed the UK’s net-zero agreement, committing the country to cutting carbon emissions dramatically by 2050.
Boris Johnson’s government oversaw the Glasgow-hosted COP26 climate change conference in November last year, and with energy and fuel prices the number one anxiety for the vast majority of British households, whoever wins the Conservative party leadership contest will find themselves facing the unenviable choice of whether to pursue net-zero targets aggressively or bow to the public’s need for financial respite.
Mark Blackwell CoreLogicCOO,
The Future Homes and Buildings Standard, set for implementation in 2025, will bring emissions targets down further for new homes, while in the private rented sector, minimum energy performance band ratings will become mandatory on all properties where a new tenancy begins after that date.
Even if the green levy on household energy bills is suspended, as many are
When you add this requirement to the soup, getting the green compliance transition as accurate as possible will be vital for lenders not wishing to fall foul of regulators.
Opting for yet another hack-and-fix job at this stage in the net-zero journey will not just rapidly become an obvious false economy; it also risks accusations of board negligence. Given the pace of new legislation implementation across our market, investing in technology that can cope is now mission-critical.
It’s time to make systems work for us all – and data relating to your duty of care to your customers, as well as to the built environment and planet, needs to be in the right format and in the right hands to achieve that if we are to get the balance right.
Firms have a year to adopt processes that allow checks and balances to be put in place to ensure customers are at the heart of everything for regulated firms. More on this later.
All these new standards spell considerable change for lenders, who will have a legal duty to withhold finance on properties not complying with the rules. When net-zero targets start to hit existing homeowners’ housing stock, refinancing responsibly
calling for, the country is nevertheless bent on cutting carbon. After the hottest day on record this summer, and whole streets destroyed in wildfires and flash flooding, Britain will find it hard to ignore the threat climate change poses to everyday life.
Late last year the government published updated rules for the residential property sector in England (devolved governments have separate proposals), confirming that CO2 emissions from new-build homes must be around 30 per cent lower than current standards and emissions from other new buildings, including offices and shops, must be reduced by 27 per cent by June 2022.
Installing low-carbon technology and using materials in a more energyefficient way to keep in heat will help cut emissions, while the new rules also include legislation for all new residential buildings, which will be designed to reduce overheating.
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As I’ve already indicated, in many cases financial stress can have a direct impact on people’s health. In addition,
Of course, all of this fits in with the new FCA consumer duty of care, and the additional onus that this places on firms to help deliver good outcomes for retail customers. We’ll be exploring this with industry experts at the LIBF Mortgage Conference in November.
Gordon Reid business developmentand manager, The London Institute of Banking and Finance
So what can you do?
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DEVELOP YOUR SKILLS
Empathy is also extremely import ant. However, in order to help them understand their options, it’s critical that you detach yourself from what they’re going through. This will allow you to prioritise and think logically, without getting tied up in the emo tional aspects of their situation.
Once you’ve identified that a customer is vulnerable, you have a responsibility to ensure that they receive the right levels of care and support. This doesn’t mean that you need to have all the an swers or be able to provide all the advice they need. You should, however, be able to identify and recommend appropriate sources of advice and support.
Financial difficulty also causes stress, which can have an impact on both phys ical and mental wellbeing. In turn, this can make people more likely to make poor financial decisions, which means they unwittingly worsen their situation.
They also highlight four key drivers as characteristics of vulnerability: poor health; the impact of life events; low resilience; and low capability.
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increased indebtedness is a factor in reducing resilience. So it’s clear that the current price increases in every thing from mortgage interest rates to domestic fuel, petrol, and food, are directly contributing to a big increase in vulnerable customers.
As a mortgage adviser, no doubt you have played a key role in helping many people buy their homes. You now have just as significant a role in helping them identify potential solutions to any finan cial difficulties – solutions that may even help them stay in their homes.
In their guidance, the Financial Conduct Authority (FCA) define a vulnerable customer as “someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.”
arely a day goes by without a new headline about rising inflation, the cost-of-living crisis, or the state of the UKBehindeconomy.these headlines, however, is a rising number of individuals and families forced to make difficult financial deci sions. The decisions they make now will affect them for many years to come.
For those whose deals have longer to run, there’s more to consider. How do they feel, for example, about the following?
It’s also crucial to establish what their highest priority is – their current pay ment, the one they might be making when their deal expires, or even the one they could be paying in five years. Whatever their situation or their long-term goals, how you look after your customers in these difficult times will have a huge impact.
That means you’ll need to draw on different aspects of your communi cation skills. Great questioning and listening skills are still paramount. The ability to reassure customers that their circumstances are not unusual, and that help is available, is something you’re less likely to have much experience in.
paying a higher rate for the time being early repayment charges that may apply if they switch or remortgage any new fees that may be payable the possibility that interest rates could be even higher when their deal expires
If your customer is struggling to meet mortgage repayments, you should encourage them to speak to their lender as soon as possible. If their financial difficulties are broader, such as being unable to meet other credit commit ments or pay their fuel bills, make sure you’re aware of local debt counselling support facilities so you can encourage your customers to seek broader help.
UNDERSTAND WHAT MAKES A CUSTOMER VULNERABLE
Supporting customers in financial difficulty
ADVICER
Many borrowers may contact you ini tially to get your advice about whether they should remain on their existing mortgage deal. For those whose deal is due to expire soon, you’ll obviously be looking for the deal that best suits their current needs, wants, thoughts, opinions, aspirations, and concerns.
ENSURE THEY ARE TREATED FAIRLY
The types of conversation you’re likely to have with customers who are struggling financially will be more sensitive than the usual. Buying a new home, or remortgaging to raise more money for an extension, are generally positive experiences for all parties. But instead of feeling good and having something to look forward to, many customers who are struggling financially will be nervous, worried, and fearful.
REVIEWING THEIR MORTGAGE DEAL
Whethercrisis.you believe this is a good cause or not, it underlines my point. London is a global city, and, perhaps, once established as such, it is true that old habits die hard. It has more in common with other major global cities than it does with many other parts of the UK. This is not bad – it just makes it different, and, I believe, more resilient.
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Like Halifax, we also put this down to the acute imbalance between supply and demand, the latter remaining persistently strong, if very slightly less so in more recent months. Demand for all property in London is becoming acute again.
Higher energy bills, weekly shops, and fuel costs of course are putting pressure on household finances, but so far haven’t really had a meaning ful impact on demand from buyers. Mortgage rates are higher than they were, but by any account they’re still incredibly low. Take inflation into account, and banks are paying us to Thereborrow.willbe households facing payment shocks as very low fixed rates expire and remortgage deal rates will mean a hefty rise in monthly pay ments, it’s true. But there will also be as many households as possible still intent on securing homes with outside
What our departure from the European Union has proven is that our focus on the UK rather than the rest of the world is a political consideration rather than an economic one. While we reflect on our way forward, the world continues to turn, and London is getting back rapidly to something we might have recognised pre-pandemic. It is not the same, but it displays many similar tendencies as before – in all walks of capital life.
Foreign investors in London’s prop erty market, whose interest had cooled during the worst of the pandemic, are also now eager to lock into capital re turns that currently offer one of the most attractive inflation hedges out there.
As if to underline the point, the mayor of London and chair of C40 Cities Sadiq Khan is convening global cities to accelerate city-led action to address the triple threat of congestion, air pollution, and the climate emergency. The C40 is a network of mayors of nearly 100 world-leading cities representing 582+ million people and one-fifth of the global economy. They are meeting to address and deliver action to confront the climate
House prices have now risen every month over the past year and are up by 6.8 per cent, or £18,849 in cash terms, so far in 2022, pushing the typical UK house price to another record high of £294,845.
Anyone who has been to the capital in recent months will attest that the city’s recovery has been swift. Tourists crowd the pavements, queues outside the galleries, museums, and theatres are back to their usual interminable lengths, and buzzing restaurants and cafés are spilling out onto the streets.
f the preoccupation with levelling up tells you anything about our country, it is that our capital and its environs remain distinct from other parts of this isle – even if you think this is not true but rather some thing that exists only in the imagina tions of the UK’s citizens.
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Though the latest Office for National Statistics figures show that London continues to be the region with the UK’s lowest annual growth, at 8.2 per cent, let’s not misunderstand the data. Despite being the region with the lowest annual growth, London’s average house prices remain the most expensive of any region in the UK, with an average price of £526,000 in May 2022, and in recent months the suburbs have once again crept to the top of the price-growth charts as hybrid working has meant a sudden dash back from the countryside to something that better accommodates those less-frequent commutes to the office.
City workers are back in the office. Shirts, ties, and after-work drinks are back with gusto as social confidence returns and cooped-up Londoners get back to business as usual.
Robin Johnson KinleighMD, Folkard & Hayward
It’s my experience that there is a kernel of truth in this assertion, and there is plenty of evidence to support it. London’s call upon our graduate base, its geographic location as a transport hub for transatlantic flights, and the sheer volume of business and wealth it generates are unparalleled.
To put this in context, the latest Halifax house price index showed the UK housing market defied any expectations of a slowdown, with average property prices up 1.8 per cent in June, the biggest monthly rise since early 2007.
space and greater square footage to accommodate more – if not permanent – home Thereworking.arealso some tailwinds for the housing market we shouldn’t discount. Developers are feeling pos itive, and from the start of August the Financial Policy Committee’s pledge to scrap mortgage affordability tests, returning to loan-to-income limits, has helped more perfectly solvent borrowers to buy.
London is a global capital
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shareholder will be automatically unfair if the reason, or principal reason, for their dismissal is that the person has made a “protected disclosure.”
The FCA campaign of 2021, “In confidence, with confidence,” encouraged individuals working in financial services to report to the FCA potential wrongdoing such as misselling, not treating customers fairly, money laundering, or failing systems andButcontrols.todrive inclusivity, whistleblow ing policies must ensure that behaviours that don’t necessarily cause financial wrongdoing can also be called out and investigated confidentially and sensi tively. In recognition of the importance of an equitable and inclusive culture, and of fitness and propriety standards, the FCA have expanded their remit to include not only industry-specific wrongdoing, but also workplace culture. For example, concerns about the failure of organisations to tackle complaints of sexual harassment can be indicative of wider organisational and cultural issues and will be of interest to the regulator.
The chain of command often defers to approaching your line manager or supervisor. But what if you can’t raise your concerns with them? Maybe they are involved in the wrongdoing, or you don’t trust them to act properly because they are connected to the perpetrator.
The sense of risk people feel when speaking up will hopefully be reduced by building a psychologically safe environment, because only by raising concerns will we see improvements, and there is a genuine need for firms to ensure their whistleblowing policies and programmes are effectively communicated, accessible, and handled correctly.
Your own firm’s whistleblowing policy (aka a ‘speak up’ policy or a ‘raising concerns’ policy) will give you an idea of how to blow the whistle
At the launch of the HM Treasury Women in Finance Charter Annual Review on 17 March 2021, Nikhil Rathi, CEO of the FCA, spoke about “conduct questions to help focus minds of senior managers on conduct risk. I would like to see this expanded – and a sixth [question] added – for all firms: Is your management team diverse enough to provide adequate challenge, and do you create the right environment in which people of all backgrounds can speak up?”
within your organisation.
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any readers of this article will have seen something that concerns them at work but may not be sure how or whether they should report it.
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What does whistleblowing really mean?
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So next time you see behaviour that you don’t think appropriate, do remember that whilst the term “whistleblowing” can bring negative thoughts of accusations and criminal activity, in fact it is about safeguard ing your employees/colleagues, your customers, and your organisation. It’s also about supporting employees from all backgrounds and at all levels of an organisation so that they will feel comfortable expressing their opinions – and, crucially, will be listened to when they do. It’s vital to employees, investors, customers, and stakeholders alike.
Effective whistleblowing arrangements are a key part of good governance. A healthy culture is one in which people are encouraged to speak out – confident that they can do so without adverse repercussions, confident that they will be listened to, and confident that appropriate action will be Culturetaken.and governance remain a key priority for the Financial Conduct Authority (FCA), and its whistleblowing rules require firms to have effective arrangements in place for employees who want to raise concerns, and to guarantee these concerns will be handled appropriately andTheconfidentially.FCArequires each firm to appoint a whistleblowers’ champion to make sure there is senior management oversight of the integrity, independence, and effectiveness of a firm’s arrangements. This includes those arrangements designed to protect whistleblowers from victimisation.
The act also protects workers from being subjected to any detriment on the ground that they have made a disclosure, and ultimately a claimant who has been dismissed or suffered a detriment because they made a such a disclosure is entitled to compensation, which is uncapped. (The compensation is based on financial loss, and employment tribunals have been willing to make substantial compensatory awards in respect of lost future earnings on the basis that whistleblowers may not be able to recommence their careers in their industries or at similar levels of compensation because their actions and the resulting publicity have resulted in them being viewed as “toxic” in the job market.)
The Public Interest Disclosure Act 1998, which came into force in 1999, is underpinned by the premise that whistleblowers will come forward provided they are protected properly from retaliation by their employer. Accordingly, the act provides statutory protection against victimization or dismissal to workers reporting malpractice by their employers or third parties. The dismissal of an employee or employee
Pete Gwilliam Virtusowner,Search RECRUITMENT
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The solution we’ve helped to create has saved this building society con siderable time and cost. It’s also been created in a way that’s easily transfer able to other lenders and other core banking systems. It can be customised to work with any core banking solution, providing a robust alternative when core banking APIs are not readily available.
Clearly, that presents efficiency issues, as well as increasing the risk of inconsistencies in data input. But while APIs tend to be today’s normal method of integration, it’s not always possible to use them – particularly if you are not processing at scale.
And how do you work with what you have rather than replacing it with anoth er thing that will be out of date again in a couple of Interoperabilityyears? is the key to this. We recently worked with another technol ogy firm and a regional building society to create a robotic process automation
The problem hinges on plugging new technology into legacy technology so that processes can become automated, costs cut, and time saved.
they’ll rank them on speed, service, andPerhapscertainty.even more important, the banking relationship depends on trust. Older tech is more vulnerable to cyberattack than new systems. When you’re custodian to millions, if not billions, of pounds’ worth of customer mortgages, hoping for the best with old systems makes a lender a sitting duck forAsfraudsters.well,the carbon cost of old systems may not figure in balance sheet risk right now, but in a few years, disclosure rules will mandate companies and mutuals to report emissions. Failing to prepare will costIt’sdear.allvery well knowing what the perfect solution is in theory, but in practice we all know we have to make the best of the situation we’re in. So how to fit the square peg of legacy technology dependence into the round hole that means staying competitive, relevant, and secure?
(RPA) integration between Iress’s MSO software and the lender’s core banking platform, using the other technology company’s RPA software.
What did we do, then? In collabora tion with the client, Iress approached a partner to design and build the RPA tool to automate the task.
here is an adage about the efficacy of fitting square pegs into round holes, and it serves to illustrate the problem faced by many mortgage lenders – in fact, I’d wager all mortgage lenders that have been around longer than a year or two.
Due to challenges with optimising their core banking platform’s APIs, the society had been manually re-keying mortgages completed through Iress’s MSO software into their banking plat form – a problem those in the mortgage market are only too familiar with.
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Old technology used by lenders to manage reconciliation processes, credit, authorisation, record-keeping, and transactional data is nearly always be spoke, and has been patched repeatedly to fix minor glitches. Workarounds make systems more and more convoluted and less and less accessible to integration with newer technology. Over time, dif ferent coding languages have come and gone, as have the systems they support – often creating silos and preventing efficient integration.
Transition on a wholesale basis is fraught with risk, however, as the expe rience of a number of major high-street banking brands has shown. Data securi ty, cyberattacks, system stability – these are all things that can become vulnerable when updating technology.
But doing nothing is also fraught with risk. Customers are notoriously uninterested in brand loyalty when it comes to choosing a mortgage. Rate matters, flexibility matters, added incentives, speed of transaction, and certainty of early DIPs all matter more than whether a mortgage comes from the same bank or building society with which a customer has their current accounts. B2B relationships operate on the same basis; ask a broker which lenders they prefer to work with, and
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Steve Carruthers head of IRESSdevelopment,business
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What interoperability offers every lender – regardless of size – is the prospect of developing situations that allow them to overcome the square-peg problem. The potential and accessibility of these will only grow with more development and hosting happening in a cloud environment, which offers a more agile and creative environment for all technology firms to deliver interoperable solutions. It means over time we can overcome and probably abandon many legacy platforms that offer more risk than reward – and that can only be a good thing.
Interoperability is the future
A recent increase in lending volumes meant this manual process was no longer viable; but short of throwing the baby out with the bathwater, our client couldn’t simply plug-and-play with an off-the-shelf product.
The answer is to have an archi tecture and platform that accommo dates change and can interoperate with other solutions rapidly – with out incurring huge costs or having to design a bespoke system, with all the challenges that presents. You do not want to create a new generation of future legacy systems, but a solution that delivers progressive transfor mations that can solve the largest problems first.
hen it comes to upgrading technology, by which I mean big core oper ating systems, making decisions comes with considerable cost and time implications, not to mention security risks.
Technology should deliver continuous improvement where and when needed
When it comes to changes in tech nology, it is natural for board members to find themselves battling significant conflicting emotions. These present constantly, and generally manifest in the form of excitement at the prospect of something new mixed with a simulta neous feeling of resistance. We naturally resist change because we fear what we don’t know. These instincts are born of millennia of human experience.
You’re opting for continuous improvement where it is needed, when it is needed. This offers the added advantage that because you’re improving systems every day, you’re using the systems you want to improve.
For this reason, most executives wres tling with the final say on investment decisions as big as technology upgrades or system replacements are under a lot of pressure to get it right. Where lenders are smaller, and boards perhaps don’t in clude a chief technology officer (CTO) with the depth and breadth of specialist knowledge to back up a decision like this, it can often fall to others or those in charge of business operations. Indeed, most boards do not have members with coding experience (although this is changing). In stark contrast to engineer ing firms and car manufacturers, where many directors will be engineers, the tech infrastructure in financial services is often a mysterious world to those at the top who understand funding, banking, lending, and saving. Knowing what to do is no less important or expensive in this case, but the knowledge and experi ence that are key to an excellent finance director don’t necessarily overlap with those of a CTO.
At Ohpen, we offer cloud-native agility, scalability, and speed, all through an affordable and robust SaaS platform. We do this partly because we can, but also because we ought to. Ours is a platform built on a philosophy that recognises that clients need control to cope with the rapidly evolving future. This approach allows lenders to change systems and also change their ways of thinking, working, and doing business – from front-end customerfacing technology through to backend systems of record.
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find a piece of tech that makes your systems faster, cheaper, safer, and more flexible –
This is where paralysis can occur. The miscalculated conclusion becomes “Do nothing, and there will be no opportunity to do it wrong; just wait for the best solution to present itself.” Unfortunately, doing nothing is doing it wrong. The absence of action in
The new generation of platform solutions offers lower cost of entry and an interoperability that is the future of technology everywhere. It offers an opportunity to do the right “something.”
But in technology, where innovation is constant and rapid, waiting before launching a new service or idea often leaves it dead in the water. That’s why today, in technology, we operate using the minimum viable product (MVP) concept. This is a product or service development technique that allows products to be used despite being imperfect or unfinished. A minimum viable product in SaaS is an early version of a product that has only the core features but still delivers enough value to customers. The ability to learn as you go, improve, and implement at pace becomes its own reward. The recent history of IT is bursting with tales of product developments that evolved into more successful versions of the original and that in the end may have been unrecognisable when compared to the original concept. Agility of this nature is invaluable.
maintaining IT security and function ality is as bad as, if not worse than, choosing an imperfect solution. Death by a thousand cuts is assured.
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Jerry Mulle OhpenMD,
Received wisdom has it that you need to know what problem you’re trying to solve before you can solve it. It’s true, but easily misinterpreted based on the best of intentions. You might assume the problem you’re trying to fix is the speed, cost efficiency, cybersecurity, or interoperability of your existing tech systems. In that case, the solution is to
Lookedcorrect?atanother way, the prob lem isn’t finding a better system. The problem is that you don’t know what you’ll need in the future, only what you need now.
First, let’s just say how difficult a time this is for lenders, as is evident in the recent decision by some to halt mortgage applications temporarily due to high demand or tech issues. That’s not to make excuses for some poor performances from a service perspective; it’s just a general observation. On the flip side, there are far fewer grounds for blaming a lack of technological capability to accept and process incoming cases in 2022. Many lenders
We know that activity levels remain high across the mortgage market and that the role of brokers is to try to make the homebuying journey as seamless and stress-free as possible for their clients and themselves. Managing client expectations also plays a key role within this process, and this is becoming increasingly tough as the links in the chain break and completion times rise.
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On a personal level, I am more of a voyeur than a participant, but it certainly has its place when one is trying to gauge attitudes and trends within the mortgage broker community. And there’s certainly always plenty of insight, opinion, and sometimes frustration from the intermediary community, especially when it comes to the performance of some lenders in the current marketplace.
According to a recent report from Smoove, one in three homebuying transactions is falling through the cracks, representing tens of thousands of broken dreams and huge sums of money essentially poured down the drain. In addition, the report outlined that the average time to complete within the last six months was 153 days, the equivalent of more than five months. In the pre-pandemic conditions of 2019, this number was 124 days – indicating an increase of 23 per cent since that time.
So, with brokers frustrated with lenders, and consumers increasingly stressed as the length and complexity of the whole homebuying process grows, what is the answer?
This is a complex issue and, as suggested in the commentary around this data, creating more certainty around property transactions is essential. Technology has an integral role to play in this process. From an intermediary standpoint, brokers need speed, clarity, and efficiency when placing an application. Platforms, portals, and systems are all about making life easier for their users, maximising time constraints and making processes more effective.
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are working hard to update legacy systems and newer lenders continue to push the tech envelope.
Challenges will always emerge for lenders and frustrations will be evident for brokers, many of which will continue to be aired on social media. I say this after reading several comments on Twitter in recent weeks from brokers trying, and struggling, to submit cases via lender portals.
To explain more about how this works, the Lendex tool connects brokers with the back-office systems of participating lenders. A full audit trail supports them in meeting their compliance requirements, and client documents can be uploaded directly to help track the progress of individual cases. Importantly, it also allows brokers to place applications with an array of lenders without the need to rekey data.
Neal Jannels
ocial media can be both an uplifting and an exasperating place, often at the same time.
In addition, nine in ten homebuyers found the process of moving home stressful, with the length of time it took to complete (40 per cent), the lack of certainty (34 per cent), and waiting for exchange and completion dates to be finalised (33 per cent) cited as some of the main reasons.
OneMD, Mortgage System (OMS)
Now this is just one example of how technology can support brokers, lenders, and clients and help to streamline the mortgage process. This is only the beginning of the tech revolution in the mortgage market; there is much more to come. So watch this space – on social media and beyond.
A desire to transform the mortgage journey was a primary reason behind our recent integration with Lendex, the multi-lender application and submission gateway from Mortgage Brain. This helps save our users up to 20 minutes per case, as it will allow them to pre-populate data directly through this gateway to the lender’s platform, therefore allowing them to submit a decision in principle or a full mortgage application through a single login.
The increase in time to complete is suggested to be a result of the postlockdown boom, as changing consumer lifestyles and demand outweighed supply, combined with greater capacity constraints for solicitors, and local authority searches taking longer to complete due to backlogs.
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Tech is key to breaking completion logjams
“Tighter monetary policy will inevitably have real economic costs, but delay will only exacerbate them. Targeted fiscal support can help cushion the impact on the most vulnerable, but with government budgets stretched by the pandemic and the need for a disinflationary overall macroeconomic policy
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There is lots of opportunity if you can get it right. Fixed-rate mortgages still account for the lion’s share of the market, with Bank of England (BoE) figures showing that 83.1 per cent of existing mortgages are sitting on fixes. Furthermore, 32.7 per cent of those deals have less than 24 months left to run, meaning borrowers will need to remortgage while the current economic uncertainty endures.
It’s time to invest in systems, processes, and thinking that can cope
Rates are exposed to uncertainty. Moneyfacts data shows the average standard variable rate (SVR) for June reached 4.91 per cent. That following a rise of 0.13 per cent compared to May’s equivalent rate, and a rise of 0.51 per cent since December 2021. This is the highest recorded since February 2009, when SVRs were averaging 4.94 per cent, surpassing the pre-pandemic average revert-to rate of 4.90 per cent seen in March 2020 at the very height of pandemic uncertainty.
The overall five-year fixed rate average sits at 3.37 per cent following a month-on-month increase of 0.20 per cent, and is the highest on Moneyfacts’ records in seven years.
As a response to this uncertainty, we have seen a gradual increase in the number of 10-year and some seven-year fixed rates in recent months, recognising an increasing concern amongst borrowers about the uncertainty of interest rates in the next few years.
The market is replete with stories of lenders whose service has fallen over as they have been caught out by rate rises. Others report that to make money, avoiding service catastrophe is
Itessential.isareal headache for mortgage lenders, particularly those relying on legacy product factories that are notoriously slow to implement repricing.
Product withdrawals and replacements are happening almost daily, to the point where lenders have barely seen the impact of a price change before they are having to hike again for fear of being left at the top of sourcing systems and swamped with volumes they can’t afford.
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What’s the answer? When times call for rapid responses to avert costly consequences, it’s time to consider investing in systems, processes, and thinking that can cope. The business case for moving to SaaS and cloudbased digital platforms that can swiftly deliver operational excellence based on strategic understanding has never been more compelling.
In July the International Monetary Fund published updated global growth forecasts, warning that from next year “disinflationary monetary policy is expected to bite, with global output growing by just 2.9 per cent.”
With the BoE hiking the base rate by 0.5 per cent and expected to raise it twice more before year end, pricing pressure is only going to intensify in the coming months.
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“Tighter monetary conditions will also affect financial stability, requiring judicious use of macroprudential tools and making reforms to debt resolution frameworks all the more necessary.”
For the eighth consecutive month the average overall two-year fixed
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Over the first half of the year (indeed, until about six weeks ago), swap rates – a supposedly accurate reflection of where markets believe interest rates will be in the future –and consumer rates had appeared increasingly disparate. The recent re-convergence is welcome, but no-one can take it for granted. Good commercial practice means lenders must be fleet of foot in getting products on and off the market.
I personally think the biggest risk facing the economy is uncertainty.
Over the course of this year, we have heard little else than the devastating effect inflation is having on household finances. The costof-living crisis has been fuelled by massive financial bailout schemes during the pandemic, global energy price spikes amid the ongoing Russian war in Ukraine, and sharply rising food and clothing costs driven by persistent supply-chain blockages.
Tim Hague SagisMD,
rate has risen, and in June stood at 3.25 per cent, up 0.22 per cent from May and 0.91 per cent since December 2021.
In a rather depressingly titled report, World economic outlook: gloomy and more uncertain, the IMF said, “The risks to the outlook are overwhelmingly tilted to the downside. With increasing prices continuing to squeeze living standards worldwide, taming inflation should be the priority for policymakers.
stance, such policies will need to be offset by increased taxes or lower government spending.
ith so much turmoil in the market now, your instant reaction might be that there is no time for the sort of investment I refer to in the title of this article. But it is more important than ever.
have processes in place to adapt and change products and services, or policies and practices, to address any risks or issues as appropriate
the results of the monitoring that the firm has undertaken to assess whether products and services are delivering expected outcomes in line with the duty; any evidence of poor outcomes, including whether any group of customers is receiving
As an integral part of the process, firms must start to collect MI in a way they perhaps haven’t done previously. Some of the MI will be available via insurers, but I wouldn’t rely on each provider being in a position to give it to all advisers by the deadline.
Training and competence records: analysis of records of staff training, including remedial actions where staff knowledge or actions were found to be below expectations.
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The following is by no means an
Consumer duty is still an agenda
e have now had the final rules from the Financial Conduct Authority (FCA) regarding the implementation of its consumer duty. There were few surprises in the body of the rules in terms of wording, although there have been some slight changes.
be able to demonstrate how they have identified and addressed issues leading to poor outcomes
Paradigm Consulting continues to support DA firms in preparing for these changes, and there is a huge amount of information available on the Paradigm Protect website for those looking for a steer.
The report will require the board, or equivalent governing body, to review and approve an assessment of whether the firm is delivering good outcomes for its customers that are consistent with the duty. This assessment must include many aspects, such as:
Some issues such as persistence and customer retention may be instantly available to a firm, but more in-depth analysis of, say, details of why customers leave will be more difficult – although this may be an indicator to flag where customer treatment is contributing to high customer drop-off rates.
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Probably the most unexpected change is the requirement for each firm to have a plan or report – the first of which is required by the end of October 2022.
spot where customers are getting poor outcomes and understand the root cause
exhaustive list, but it gives a flavour of how firms may start to use MI to measure outcomes, which is not the easiest thing to do:
Distribution of products/pricing and fees and charges: reviews of whether certain groups of customers are more likely to buy certain products, incur particular fees and charges, or appear to be receiving outcomes that are not as good as those of other groups of customers.
File reviews: reviewing customer files and monitoring calls to check for errors and assess whether customers received good outcomes.
identify and manage any risks to good outcomes for customers
an overview of the actions taken to address any risks or issues
worse outcomes compared to an other group; and an evaluation of the impact and the root cause
Before signing off the assessment, the board or equivalent should agree to the action required to address any identified risks or poor outcomes experienced by customers, and any needed changes to the firm’s future business strategy. Clearly, this means the firm must:
how the firm’s future business strategy is consistent with acting to deliver good outcomes under the duty
We already knew that firms are required to undertake at least a review annually and an assessment of how they are getting on with the consumer duty. The review and assessment are now referred to as a report, and firms can expect to be asked by the FCA for that report along with “Management Information [MI] that sits behind it.”
This report will be required to detail pretty much every aspect of what a firm is doing to implement the culture change required in many instances to focus more on outcomes than on following specific sets of rules.
Allowing staff to give honest feedback when they think products or services, or the processes used to deliver them, could be improved.
It is reasonable to think that not all firms will be expected to collect all this information; it must be relevant and proportionate to them. The key will be getting as much available data as possible to assess whether certain groups of consumers are seeing worse outcomes.
Mike Allison head of Paradigmprotection,Mortgage Services
item for 2022
Feedback from other parties in the distribution chain, such as manufacturers and distributors sharing information about the way in which products are sold, and the extent to which actual sales matched the target market.
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lthough proposed private rented sector (PRS) regu lation changes should offer both tenants and landlords protection from a broader range of issues, a potential policy oversight could upset an established arrange ment between students and land lords, making private renting more difficult for both parties.
Each year sees an influx of new undergraduates move into halls of residence, often taking rooms previously occupied by the now more seasoned second-year students who swap thehassector,moststudent-lettingAlthoughofaccommodationuniversity-managedforthefreedomprivatelyrentedsharedhouses.somewhatofaniche,themodelisamongsttheestablishedintheprivaterentedsothiscycleissomethingthatworkedforalongtime.However,ifproposalsdetailedingovernment’s
A fairer private rented sector white paper are imple mented, the arrangement will become almost impossible, making it
In such scenarios, landlords won’t be able to market their properties for the next academic year, leaving them open to the risk of costly voids. And if landlords don’t know when their tenants will vacate the property, they cannot sign new tenancy agreements with incoming tenants, making the task of finding a shared house harder for students at a time when they should be focusing on important end-of-year exams.
ABUY-TO-LET
Will student lets get caught in new-regulation crossfire?
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Previously, tenancies could be ended amicably using Section 8, but despite the proposed changes resulting in almost twice the number of mandatory grounds for possession available to landlords currently, the one covering the student market will only cover student accommodation that is currently let to non-students and apply to educational estab lishments or purpose-built student accommodation providers.
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I feel that some of the response to the publishing of the white paper on reforming the PRS was a little unhelpful because there was a lot in there that responsible lenders and landlords will support, and we must not forget that at this stage the proposals are some way off from becoming law.
Moray Hulme director for mortgage sales, Paragon Bank
Despite this clear policy blind spot, the government feels that students need to be included in the scope of the reforms, as they may want to remain in their accommoda tion “because they have local ties or a family to support.”
The majority of the UK’s 2.6 million higher education students will choose to live away from home during their study
This highlights the importance of ongoing discussion on the proposed changes between the government and concerned parties, including landlords and universities, as well as lenders.
This new type of tenancy may result in landlords having no idea what date existing student renters will terminate their contracts and move out until two months before they do so – and this could be as late as the end of April.
The majority of the UK’s 2.6 million higher education students will choose to live away from home during their study, their most popular option being privately rented homes, so failing to deliver policy that works for the people who provide these could have quite serious negative consequences for a large proportion of the people it is designed to Accordingprotect.toresearch under taken for Paragon’s Studying student buy-to-let report, this market is served by a relatively small propor tion of landlords – just over one in ten. If this small group of landlords is deterred from investing in student buy-to-let properties, we may see the sort of stock shortages that have placed upward pressure on rents in other parts of the rental sector.
It’s back-to-school season, and for the landlords serving the student lettings market this time of year marks a culmination of hard work following summer’s frenetic change over of tenants. With timescales largely dictated by the academic year, landlords have a small window in which to carry out any necessary cleaning and tidying of the property as well as undertake any main tenance that is required after the outgoing student tenants leave.
While this may be true, and people in such scenarios obviously shouldn’t face eviction, reforms must account for market nuances to ensure they work for all concerned parties.
harder for both student renters and landlords.Thechanging of assured shorthold tenancies to periodic tenancies will lead to students having monthly rolling contracts that they can end at any time if they give two months’ notice to their landlord.
Thanks to higher-than-average demand for student lets, average rental prices in England are reported to have risen by a whopping 17.96 per cent during July. This took the average cost up from £1,050 in June to £1,238 and represents the highest average ever recorded by the Consumer Prices Index, with every region monitored experiencing an increase in the rental costs.
When it comes to cost, it was interesting to see a host of research emerge in recent weeks that serves to highlight some of the financial concerns within the student community, especially with the cost-of-living crisis raging.
Following post-pandemic grade inflation, which resulted in a higher intake of students at some of the most sought-after universities, some cities are already said to be experiencing an undersupply of affordable accommodation. For example, in Bristol, the average price difference between HMO and PBSA is £76 per week; in York, this is £43.53, and in Edinburgh, the difference is £37 per week.
Accommodation for students may have already felt the impact following a similar change in the law in Scotland, with students struggling to find suitable accommodation. Edinburgh ranks in the top ten most expensive cities for both HMO and purpose-built student accommodation (PBSA), at £156.34 and £193.47 per week, respectively.
Cat Armstrong mortgage club director, Dynamo for Intermediaries
further due to the supply of HMO student accommodation being compromised under planned changes to tenancies as part of the Renters’ Reform Bill, resulting in less choice and higher rents for students.
www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER 23 REVIEW BUY-TO-LET
These figures really do signify how tough it can be for students financially, although it’s prudent to say that this is primarily down to market conditions rather than any narrative of landlords dramatically hiking rents in order to take advantage of increased demand. Having said that, after some barren times, this does represent some positive news for those landlords providing good-quality accommodation for students in the right
Analysis from property company Cushman & Wakefield suggested that for every available bed in halls
As well as the highest-ever rental price averages, July also saw the index’s lowest-ever void rates. Again, this was driven by a surge in demand for student lets, with the North West and the South West seeing the biggest proportional fall in voids. The lowest voids in England can now be found in the South West, at just five days.
A further study predictedAccommodationforstudents.combythatstudentrentswillrise
of residence in London, there are 2.5 students. This also outlined that university students who live in halls and take out the maximum student loan available spend threequarters of that money just on rent. In addition, according to the NUS, those living in the most expensive cities are paying over £200 in rent every week, and around a third of students survive on just £50 a month – with one in ten resorting to using foodSupplybanks.remains a real issue for students, and rents are increasing sharply because the building of new housing has not kept up with the rising numbers of students attending university. This was evident in the latest market analysis from Goodlord, which highlighted that the lettings market continued to gather momentum as a surge of high-value student lets saw average rental costs and void periods break records in July.
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he student population has had it tough in recent years, especially its members who were looking forward to university life – living away from home for the first time and the freedom that comes with that. The initial stages of the pandemic temporarily curtailed some of these dreams as halls and classrooms were closed, with student life moving online. This also proved to be a tough time for those landlords who have built portfolios to incorporate a large element of student lets and houses in multiple occupation (HMOs) in and around major university towns across the UK.
Students return – to a tight rental market
Theareas.continued rise of the student population could see more landlords taking a closer look at how to integrate student lets and HMOs into their portfolios and the strength of the yields on offer. This is an area on which intermediaries with landlord clients should be keeping a close eye.
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Thankfully, schools and universities are now largely back to normal, and in the midst of a summer break I’m sure there are many students who are frantically looking to secure accommodation for the new school year, whilst also working out how they can afford to pay for it. On the flip side, I also imagine that many landlords are in the throes of touching up properties and embarking on a series of odd jobs to cover up the previous year’s student misdemeanours and to prepare themselves for a new intake.
Jane Simpson TBMCMD,
This unusually changeable market and expected additional rate rises are leading to an increased interest in the stability offered by mortgages with rates that are fixed over longer terms.
While fixing for longer periods can offer stability – something that many may be drawn to amidst so much economic turmoil – there are some drawbacks to be aware of.
This is because a lot can change over two or five years, let alone seven or 10, so the borrower may want to sell up or at least port the mortgage over to another property in that time, and doing so can incur significant early repayment charges.
An increase in investors fixing over longer terms also has implica tions for brokers.
While historically the appetite for these longer-term fixes has been
While fixing for longer periods can offer stability –something that many may be drawn to amidst so much economic turmoil – there are some drawbacks to be aware of
We also must think about addi tional borrowing a landlord may want to access in future.
low, they may appeal to clients with well-performing portfolios who have no intention of selling. With the cost of other lettings business overheads also increasing, many landlords have been forced to increase rents, or will do so in the coming months. Doing so with fixed mortgage costs would help to offset rising prices for things like utility bills and maintenance, or landlords could limit rent increases to help retain good tenants at a time when they are also likely to be feeling the squeeze.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com24 REVIEW
For me, all of this shows how the role of the broker is as important as ever; providing sound advice can help landlords to make informed investment decisions that have a real impact on their lettings businesses and on the millions of people who turn to the private rented sector for largely good-quality, affordable homes.
Since the Monetary Policy Committee started increasing rates, we have seen a record high average standard variable rate (SVR), leading the Financial Conduct Authority (FCA) to intervene, recommending that borrowers switch to a fixed rate product sooner rather than later in order to save money amidst increasing pressure on household finances.
FBUY-TO-LET
Using the proposed changes to EPC regulations as a topical example, we could see a landlord who has purchased a property after
When changes to underwriting, introduced by the PRA in 2017, increased the proportion of landlords taking out five-year fixes, it removed some opportunities for re-brok ering after two years. A rise in five-, seven-, and even 10-year fixed-rate mortgages would mean this would be repeated to some degree, so while brokers pride themselves on finding the best products for their clients, lenders may need to consider how to compensate those who have helped to secure them long-term customers.
With swap rates also having increased, pushing up the cost of funding for lenders, we have also seen hundreds of products repriced or withdrawn. In addition to resulting in less choice and potentially higher repayments, the speed with which product ranges are being altered is causing headaches for borrowers and brokers – Moneyfacts’ analysis shows that the average shelf life for mortgage products of 17 days is the lowest they have ever recorded, following a drop from the previous low of 21 days reported in June.
Fixed mortgages attractive in volatile economy
With less demand for longer fixedterm mortgages, fewer lenders offer them, so there isn’t the same level of competition as we see for shorter fixes. In addition, fixing rates over longer periods can present extra risk for lenders, something that they have to pay to mitigate through generally higher swap rates. These factors often result in longer-term fixed-rate products costing more than shorter-term ones.
The reduced flexibility that often accompanies longer-term products should also be considered, and it is important to discuss future plans with borrowers who are thinking of committing to a mortgage for a number of years.
ollowing the steepest increase in 27 years, the base interest rate sits at 1.75 per cent, its highest level since 2008. The latest in a series of hikes looks like it won’t be the last, as the Bank of England contends with slow economic growth and infla tion that has surged to surpass nine per cent; this is well over the government’s two per cent target, and on course to hit double figures before the end of the year.
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borrowing at 60 per cent LTV, fixed over a long period. A couple of years into the loan, the landlord learns that they need to spend a significant amount upgrading the property in order to meet new energy-efficiency regulations. While they would likely have enough equity in the property to finance the works, they are unable to access it due to the lender not allowing product switches or further advances to be taken out.
even
online account. With more
make changes
policyholders
coming soon, this is just one of the ways we make life easier for your clients. paymentshieldadvisers.co.uk/customer-account 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 08/22 02386 IMAGINE MAKING LIFE EASIER FOR YOUR CLIENTS
manage their policies. Your clients can
Paymentshield
one
their personal or bank details, and renew their insurance directly
Paymentshield’s newly launched customer platform makes it easier for to now view all their policies in place, to from their functionality
The market conditions with PI are tough, but if your construction clients are facing reductions in the avail ability and breadth of PI cover, then work with a GI provider with the knowledge and experience needed to achieve the best possible solution for their needs.
Professional indemnity (PI) premiums may be affected – bad news for a sector that’s already operating in a hard market that has pushed rates up and driven capacity down.
The new rules will require principal firms to apply enhanced oversight to their ARs. Whether one is directly authorised or an AR, the FCA rules apply to us all. We all have to adapt and change with regulation to ensure good customer outcomes.
ummer certainly arrived with a bang in July, with the UK experiencing a new record tem perature of 40.3°C and a total of 46 locations across the country exceed ing the previous record of 38.7°C. Ac cording to the Met Office, this heatwave demonstrated much more widespread and significant heat than previous note worthy extreme heat events, giving us a glimpse into the future, and the hotter, drier summers ahead.
Clients who suffer a subsidence claim may only get cover with their existing provider unless they can demonstrate to a new insurer that rectification works have been completed and the risk of future movement is low; they are also likely to need supporting evidence from a professional surveyor’s report. For anyone looking to buy a property
The Act creates new “duty holders” and expands the roles of existing duty holders under the Construction (Design and Management) Regulations 2015 (CDM), and additionally makes those duty holders more accountable. These duty holders are responsible for the whole life cycle of a building, from pre-construction procurement through the construction phase to the post-construction occupation and property-management stage.
With more responsibility comes more risk. As far as possible, the prin ciple to be applied is that the person or entity that creates a building safety risk should be responsible for managing that risk.
The Building Safety Act 2022 came into force on 30 June 2022, finally bringing into law much-anticipated, far-reaching changes to the ways that building design, construction, management, and safety are regu lated, with a particular insurance impact on high-rise properties.
DEAL WITH WHAT YOU KNOW AND REFER THE REST
Long dry spells bring the increased likelihood of clay-rich soils shrinking, creating downward movement in build ings, and adding strain to the structure of properties – known as subsidence. Signs include diagonal cracking and doors that don’t fit their frames well. The British Geological Society has predicted that the number of homes affected by subsid ence will increase by a third from 2020 to 2030, and triple by 2050.
with what you know and let those who are experts in other fields deal with the rest.
At this stage it’s too early to gauge insurance market reaction.
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Geoff Hall Berkeleychairman,Alexander
As I mentioned in last month’s column, increased consumer protec tion rules are regularly introduced to support customer outcomes, and the Financial Conduct Authority (FCA) has now confirmed new oversight requirements that will apply to the appointed representative (AR) regime, coming into force on 8 December 2022.
For general insurance, most mort gage brokers are likely to handle standard home insurance for their clients, but when it comes to the more complex products (whether that be non-standard home insur ance or complex commercial), refer rals to a GI provider with specialist product knowledge enhance your opportunity to reach more customers with a wider range of policies to meet their demands and needs. It’s long been said, whether you’re an AR, a directly authorised broker, or a principal, that you should deal
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The best preventative measure clients can take is to remove or cut back trees and shrubs planted too close to their property. The general rule of thumb is trees should be kept to a height less than 1.5 times their distance from the house, so a tree 15 metres from the property should not be allowed to grow higher than 10 metres.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com26 REVIEW GENERAL INSURANCE
BUILDING SAFETY ACT 2022: WHAT WILL IT MEAN FOR PLACING PROFESSIONAL INDEMNITY?
Subsidence is a key concern for your clients
that has experienced previous move ment, even if it is historic movement or has been fully underpinned, the purchaser may find arranging cover a struggle, and may need to commission a full structural report from a qualified surveyor and not just rely on the home buyers’ report. However, it’s always worth checking in with your general insurance (GI) provider – we love a challenge. If you’re having difficulty sourcing cover for a client, there’s a good chance we’ve had to handle the same complexities before.
Training new GI specialists
insurance. In our most recent adviser survey, conducted with over 300 advisers, we found that despite 96 per cent of advisers believing that discussing GI with their clients is best practice, 57 per cent regu larly miss opportunities to do this. Training and support are needed to address this.
We know from our market research that there remains a gap in the market when it comes to general
First, unlike some of the life-anddeath scenarios we hear about in the national media, the financial services skills shortage is not yet at a crisis point. By comparison, we still have a solid base of good people in the advisor community to keep the wheels
REVIEW GENERAL INSURANCE
But there’s more than one way to define a skills shortage, and more than one way to tackle it. Thankfully, here in the finan cial services industry we can take encouragement from certain facts.
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he current skills shortage in the adviser market is just a microcosm of the wider UK – with an astonishing 87 per cent of employers nationwide currently admitting that they are struggling to fill positions.
Secondly,turning.with enough advance planning, we have much potential within our industry to help turn the tide by focussing on bringing in people with great customer service skills and then filling their skills and knowledge gaps with quality training andOfsupport.course, we recognise that this might be harder for smaller busi nesses – which are stretched enough with the day job and may not have the resources or the thinking time for HR and learning and development (L&D) activities. But it takes every shape and size to make a commu nity, and larger businesses should consider how they can support smaller ones.
We hugely respect, for example, the initiatives of the Openwork Partnership and others, with their academies and business schools to help train the next generation
of mortgage brokers. As insur ance experts in our space, we are committed to continuing to develop our existing CPD-accredited GI Academy to offer support to those new to the market who want to advise on general insurance along side a mortgage – as well as ulti mately supporting firms looking to recruit and train individuals to specialise in selling GI (general insurance) alone.
It’s also incumbent upon us to make sure L&D initiatives are both easily accessible and as engaging as possible.
In today’s tech-driven business, we must remember that we already have so much of the necessary infrastructure to deliver a truly significant training and learning experience. The power of such technology as our chatbot, for example, will enhance an already engaging user experience by offering immediate support to those less experienced by answering questions and giving guidance. This is another example of how technology will continue to make advisers’ lives easier every day. M I
Emma Green director of Paymentshielddistribution,
www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER 27
In addition, we’ve continued to maintain the largest intermediary sales team in our market. That’s because we recognise that to truly make GI accessible to advisers new and old, you absolutely need stand-out technology that delivers an accurate quote for the customer, but you also need to provide the support to ensure that technology is adopted and to help in developing advisers’ skills, confidence, and mindset.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com28 REVIEW LATER LIFE
ater-life lending is playing an increasingly important part in the calculations of many people who are planning their retirement or are already retired and are looking to ensure their standard of living into the future.
The industry is facing a further revolution with the FCA’s announcement that it is indeed implementing the long-trailed Consumer Duty, although it has agreed to delay extend the start date by an extra three months to give brokers more time to prepare. D-Day is now 31 July 2023.
to help manage their finances in that period, representing the withdrawal of £1.6bn in property wealth, according to the latest figures from the Equity Release Council.
financial-servicesreleases/fca-consumer-duty-major-shift-https://www.fca.org.uk/news/press-
We believe that with any surge in enquiries, there is a danger that, unless advisers are well trained and versed in all aspects of later-life lending, the wrong advice could unwittingly be given. This is too serious to get wrong, and while advice might be accepted at the time, especially if there is an immediate need to stabilise finances, retrospective file-checking in response to a complaint years down the line could prove to be expensive financially and professionally.
Demand for later-life lending in the spotlight
particularly well trained to assess and advise properly.
Interestingly, the actual market for those specifically wishing to release equity from their property is relatively small in comparison to the total volume of lending to those over the age of 55. Lifetime mortgages (LTMs) in Q4 2021 were recorded at 10,860.
Shaun Almond HLPartnershipMD,
M
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At HLP, member firms with qualified later-life lending advisers are supported by training and logistical support and are free to offer advice directly. However, other HLP members who come across lifetime mortgage enquiries in their everyday mortgage business must refer them to our specially selected panel of LLL-qualified HLP advisers.
In 2022 the opportunities for homeowners to raise capital have been made easier by record house prices, even though interest rates are going up. At the same time, retirees and those close to retirement are recognising that the costof-living crunch can be offset by making use of the equity built up in their homes. Lifetime mortgages hold out what seems to be a magic pill for the issues of funding old age, and do represent a valuable option for those seeking to improve their financial position in later life. Also, it is increasingly apparent that matching customers to the best options for older clients must include LTMs because releasing equity through such a product has plenty of attractions. It is not suitable for everyone, however, as individual circumstances vary widely among cases and advisers. Even those with years of lending experience must be
But is the sector well served, with enough advisers who are fully up to speed with all the pros and cons of later-life lending? There are no precise numbers, but clearly, as people are living longer and the cost of living shows no sign of peaking, the demand for advice can only increase. According to UK Finance, in 2021 187,120 new mortgages were granted to borrowers over 55 years of age, with total lending in the year of £28.1bn. This represents an 11 per cent increase in mortgage volumes over the previous year and a 22 per cent increase in the value of lending.
Fast forward to this year: between April and June, 12,485 new equity release plans had been taken out, which means that just over 200 customers chose equity release every working day
Cost of living rises are affecting everybody, but for those whose incomes are fixed or are going to be fixed in retirement, the issue will cause more older homeowners to consider later-life lending as a way to shore up their finances.
Being ready for its implementation is going to take a lot of preparation, and firms will have to divert resources and money to ensure compliance. I would recommend that all firms take advantage of every opportunity to talk to compliance professionals and attend the many free seminars that will be available. Don’t underestimate the changes that Consumer Duty will bring. I
CONSUMER DUTY
All this simply highlights the real-world applications of equity release and how property wealth can be used flexibly and effectively. External pressures from rising inflation are unlikely to lessen any time soon, so it’s essential that advisers should feel comfortable advising on equity release and, where appropriate, recommending a product type that will best suit their clients’ needs and long-term goals.
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Releasing equity to gift to family or friends was also popular among customers, with 15 per cent choosing to release equity for this purpose. This may be to help loved ones onto the property ladder or to help support care costs. Alongside these needsdriven reasons for releasing equity, we are still seeing customers use equity release to make substantial one-off purchases such as booking a holiday (14 per cent), buying a new property (12 per cent), or buying a car (10 per cent).
Alice Watson head of marketing –Canadainsurance,Life
standard, which mandates that all new plans in Q2 come with the option to make penalty-free partial repayments when affordable, allowing customers to reduce their future interest costs with no requirement to make ongoing Interestingly,repayments.thedataalso shows growing interest in lump-sum products, which have overtaken drawdown to become the most popular option among new customers. This could be driven by people looking to clear their existing mortgage at time of maturity or seeking to support a loved one’s deposit for their first home. This supports the findings of Canada Life’s ‘customer reasons for loan’ data, which finds that the most popular reason for releasing equity is to pay off an existing mortgage, accounting for half of applications. This was followed by raising money to pay for home improvements (38 per cent) and supporting day-to-day living costs (20 per cent).
o one is immune to feeling the financial pressures caused by the rising cost of living. Across the country many people will be sitting down, taking stock of where their wealth lies, and identifying which levers they might be able to pull. This is where advisers can play an essential role in navigating a path through this potentially difficult time. A trained professional will be able to spot opportunities while understanding the long-term goals of their clients and recommend a course of action that may otherwise have gone unnoticed.
www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER 29 REVIEW EQUITY RELEASE
This environment of high property values feeds into the latest statistical update from the Equity Release Council, which found that £1.6bn of property wealth was withdrawn in Q2, equating to around 205 new plans being agreed each working day. This follows the improved flexibility of the council’s fifth product
The value of property in a cost-of-living crunch
For some people this may include looking at their property wealth in a new way. Canada Life analysis of the property wealth amongst the over-55s across England, Scotland, and Wales found that there was over £800bn of equity available for release in Q2 of this year. This is a record level driven by steadily increasing property values. Perhaps unsurprisingly, homeowners in the South East and London have the greatest amount of equity available to them. However, homes in the North West have seen the greatest jump in property prices, increasing by 4.8 per cent in Q2.
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Those delays can be a disaster for borrowers, whether they want to purchase or remortgage.
THE ROLE OF THE PANEL MANAGER
Conveyancing is a good example. Helping a client find the right conveyancer for their case can be a timeintensive process, particularly if the case is a little out of the ordinary – a buyer looking to purchase through a limited company, for example, or using a scheme like Help to Buy.
DEALING WITH HEAVY WORKLOADS
Because of the volumes that we transact with those top legal firms, we – and our intermediaries – benefit from a buying power that will not be the case with a high-street conveyancer. It’s somewhat akin to using a mortgage club.
This has obviously resulted in substantial delays for some transactions, with typical deals now taking weeks longer to go through than was the case before the pandemic.
Smart partnerships can ensure excellent service, even in busy market
This industry is built on relationships and partnerships, on working together to deliver the best possible experience to our customers. Identifying the right panel manager can not only reduce your own workload, but also ensure that your clients’ cases go through swiftly and stress-free.
Karen Rodrigues sales eConveyancerdirector,
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Given these heavy workloads, it’s important for intermediaries to think carefully about the partnerships that can help take some of that strain away and allow them to work more efficiently.
According to the latest house-price index from the Office for National Statistics, annual house price growth now sits at an extraordinary 12.8 per cent, meaning that the typical home has risen in value by £32,000 to £283,000.
However, it’s not just the purchase market that remains incredibly busy, with intermediaries also reporting significant levels of interest in remortgages. This makes a lot of sense; the incredible rate of inflation means that many households are looking at ways to reduce their outgoings, and with mortgage payments being the largest payment most people make on a monthly basis,
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com30
The reality has been rather different. While the frenzy of those heightened activity levels has not been sustained, the truth is that the purchase market is still extremely busy. Intermediaries will know only too well that there are still an awful lot of borrowers desperate to get on with house purchases as quickly as possible, with this demand continuing to drive up house prices.
This drive to remortgage is becoming ever stronger given the situation with interest rates. We have seen a handful of base rate hikes this year already, with the Bank of England now moving the base rate to 1.75 per cent following the largest increase in decades.
here will be some across the mortgage industry who thought that the end of the stamp duty holidays would see activity drop back to more modest levels. After all, without that tax incentive, would there still be demand for homebuyers to move up or down the housing ladder?
Those increases are feeding into higher rates on mortgage deals, with the result that many borrowers are choosing to move now in order to try to secure a lower fixed rate for longer.
Specialism makes a big difference here, while it’s also important to acknowledge the difficulties that some legal firms are having with their own workloads. The sad truth is that the heightened activity we’ve seen in recent years is not something that many legal firms are set up properly to handle.
Given this situation, being able to identify a conveyancer who will not only understand the crucial elements of the case but also have the capacity to do so in a timely manner is absolutely vital.
That’s where a panel manager can prove so useful. Within a few minutes you can swiftly get a quote for your client, sorting the results by features like location, price, or ratings. With a top panel manager, you can also enjoy peace of mind that the conveyancers on offer will actually be able to take on the case.
Indeed, it’s worth highlighting that, according to the government’s estimates, the number of transactions likely to take place in 2022/23 is on course to push 300,000, making it the second-busiest year in the last five years.
it follows that remortgaging to a cheaper deal would appeal.
[I]t’s worth highlighting that ... the number of [house purchase] transactions likely to take place in 2022/23 is on course to push 300,000
At eConveyancer, we hold a weekly pipeline review of cases with the top legal firms on our panel. It means that we can ensure that a high level of service is maintained, meaning our intermediary partners and their clients are enjoying a consistent experience.
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These activity levels obviously put intermediaries under enormous pressure. The reality is that mortgage advice has not been a 9-to-5 job for some time – all advisers will have tales of late nights and weekends spent working in order to help a client secure the funds they need in time.
SCAN TO LEARN MORE www.mpamag.com/uk The champion of the mortgage professional, covering the latest news and updates within the world of mortgage management • Interviews with the biggest names in the industry • Best-practice profiles and case studies • Special reports and industry rankings • Business strategy content
IR35: What do the rule changes mean for you?
riginally introduced in 2000 to allow workers to pay less tax by setting up a limited company structure, the IR35 is a complex and often misunderstood piece of tax Thelegislation.confusion arises from a variety of factors, including a perceived lack of transparency that has caused problems for brokers when assessing mortgage applications.
MORTGAGE APPLICATION PROCESS ROUND TABLE Supporting confident remortgages IBIM11008 Mortgage trade advert_FPg and strips_v4.indd 1 13/01/2022 15:13
To add to the mix, last year’s changes to the IR35 mean that lenders can no longer use the previous method of calculating contractors’ gross earnings based on their day Misunderstandingsrates. and errors can prove costly for the clients themselves, as these could affect their af fordability, or even result in a mortgage application being rejected. In a worst-case scenario, it could involve a time-consuming – and expensive – tax investigation by HMRC. Just ask Jimmy Carr.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com32
Association of Independent Professionals and the Self-Employed (IPSE) recently described the IR35 off-payroll working rule changes as a “disaster.”
Of more concern to brokers who have to assess a person’s income, four out of five contractors (80 per cent) working inside IR35 said they had seen a drop in their quarterly earnings; a quarter even said their income had dropped by more than 40 per cent.
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The issue has become so hotly contested that the
To highlight the point, an IPSE report from last October said that over a third of contractors (35 per cent) have left self-employment since the changes to IR35, and while there are more than 91,470 contractors working in the UK’s IT industry alone, half of them have reportedly considered closing their businesses since last year’s reforms – and up to a quarter are now thinking of operating from abroad.
To unravel the mysteries of the IR35, Mortgage Introducer, in association with Barclays Bank, brought together five leading mortgage experts to discuss possible solutions regarding how to improve the mortgage application process for
As well, the often-convoluted details of a contrac tor’s tax status, with some brokers even admitting complete ignorance about the IR35’s existence and how it’s used to assess a client’s earnings, have com pounded the problem.
The report added that more than a third (34 per cent) were now working through unregulated umbrella companies and another third (36 per cent) were working through engagements deemed “inside IR35.”
Dazed and confused by IR35? Do you even know what it is or how it is used to assess income for a certain group of people? If you’re a broker and you’re baffled by off-payroll working rules, you’re not the only one
He added, “What is clear is customers have to pay tax, be they contractor or the noncontractor. The difference is that if you start having to pay National Insurance and income taxes at source, doing it for your business, that’s where the discrepancy lies.
“At one point, I was told that I’d have to completely change how I had been set up for the last 15 years, [because] if I carried on the way I was going I’d poten tially be taken to court with hundreds of thousands of pounds’ worth of fines and legal fees, only for all that to change two weeks later after being told I could carry on as I was. Honestly, it’s very, very messy.”
“It’s about making sure that the broker and the cus tomer understand what the net income picture now looks like compared to what it would look like if the customer were just deemed to be a self-employed contractor paying taxes through the self-employed
Calder agreed, pointing out that with changes in laws that affect income, affordability, or lending policy, “there’s always a bit of a period of time to adapt.”
There was a certain amount of consensus among the panel as all five disagreed with the IPSE’s scathing verdict that IR35 had been a “disaster,” but they con ceded that more needed to be done to help everyone understand its importance, given that many workers, such as those in the film and IT sectors, predominantly operate as Reflectingcontractors.thepanel’s mood, Spreadbury gave an insider’s view of what happens if you are deemed to have fallen foul of the rules.
“It’s that classic case of unintended consequences. It’s coming into the market again now when there are so many other headwinds that we’re seeing, so it’s just adding confusion to a very confused market,” he said.
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“The challenge around these umbrella company setups is that outside there’s stuff that we’re not going to be able to use” JUSTIN WALLACE
Stewart was critical of HMRC, suggesting that “what might appear to be a very good idea in a dark room in a nondescript office … can be a very poor idea by the time it hits the consumer in the high street.”
“As a contractor, and as somebody who has had IR35 affect my own life, let alone my clients’ lives, I would say it’s definitely challenging,” she said. “The real difficulty seems to be from a legislation point of view – there don’t seem to be any hard-and-fast rules.
ROUND TABLE the date
MORTGAGE APPLICATION PROCESS
“Within 10 questions, a good broker knows what’s going to happen with a mortgage with probably 90 per cent accuracy” MARTIN STEWART
To kick off the debate, Wallace said it was imperative that brokers keep up to date with their knowledge of IR35, as workers often change their employment status, in much the same way legislators regularly amend tax laws.
“At some point in the future, they will go on to con tract because they deem that as being a way to have more flexible work, so brokers must be aware of how they can flag these issues to their customers in the future,” he said.
company. It needs some thinking on behalf of the broker and the customer around how best to use the new ways to maximise that affordability when it comes to applying for a mortgage.”
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both contractors and banking staff.
For Stewart, speaking as the head of a London-based brokerage, it’s the timing of the reform, not the IR35 itself, that’s a disaster.
Craig Calder, director of mortgages at Barclays; Jodi Spreadbury, senior mortgage and protection adviser at The Mortgage Broker Ltd; Sonya Matharu, senior mortgage broker at The Mortgage Mum; Martin Stew art, director at London Money; and Justin Wallace, intermediary relationship manager at Barclays, got together at a recent round table to discuss how umbrella companies structure income, as well as the changes that were introduced to IR35 in April 2021. They also threw in some suggestions on how to simplify a mortgage application for independent contractors.
KEEPING UP TO DATE
MORTGAGE APPLICATION PROCESS
ROUND TABLE
“Why does the government think that that’s the right way? That’s how they’ve been advised, but [virtually] no lenders like it,” she remarked.
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Instead, brokers should only “work the numbers” based on the data provided by the contractor’s ac countant. That way, if there were a discrepancy, the onus would not be on brokers to correct it.
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“[T]he broker and the customer [must think about] how best to use the new ways to maximise ... affordability when it comes to applying for a mortgage” CRAIG CALDER
“The challenge around these umbrella company setups is that outside there’s stuff that we’re not going to be able to use – and that’s where the challenge comes in, especially around expenses,” he explained.
customers struggle to explain how these payslips are set up. It’s very confusing. It’s opaque,” he said, opin ing that there should be a more uniform approach to umbrella setups.
The conflict between accountants and brokers was a recurring theme, with Wallace stating that contractors should be treated as employed.
In response to Spreadbury’s comments and her particular experience, which echoed those of many brokers, Stewart called for a rethink of IR35.
He said, “I’ve got current contractors who almost lost their houses by using certain schemes. They work on the assumption that the tax man is so disorganised and too busy to challenge them.”
“there is a lot of confusion,” both among brokers and clients. “It often fuels anxi ety, and that’s a word that tends to pop up with my contractor clients – it’s confusing for them to get their heads around what the lenders’ requirements are, but they [the lenders] are also struggling to understand how the clients are getting paid. That’s hard for the clients to understand because that is why they then can’t get a mortgage.”
Spreadbury cited an example of how a leading build ing society had changed its set-up for assessing a person’s annual income, from a straightforward system based on obtaining a figure from a day rate – times five days, times 46 weeks – to the current system, which involves umbrella companies and contractor pay slips that may include £2,000 a month as holiday pay, prompting a reminder from the panel that neither expenses nor holiday pay is taxable.
Wallace agreed. “Even the most experienced mort gage brokers that I’ve spoken to who deal with these
Stewart, however, warned that brokers should not “ski off-piste” by becoming “pseudo tax advisors.”
The revelation raised a few eyebrows, prompting
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com34
The panel was critical of certain practices within the mortgage industry and the lack of knowledge evidenced by some in the sector, as Spreadbury pointed out.
She nonetheless stressed that it was the job of brokers to help clients understand not just how their income structure works in the eyes of lenders, but what lenders are looking for – especially as borrowers are often not up to speed with the latest tax changes, as Stewart pointed out.
“There was a point in March 2021 where I called three lenders specifically who are normally very, very good at contracting and asked them what their IR35 changes were, and two of them responded with ‘What’s an IR35?’ so the education is just not there,” she commented.
PROBLEMS WITH EXISTING PRACTICES
As a way forward, he suggested using a simpler sys tem, harking back to the methods that were previously used for assessing a contractor, which he described as “veryMatharustraightforward.”agreedthat
“That’s fair because to all intents and purposes they’re employed by an umbrella company, and if someone’s employed, they should be able to get the same amount of money as someone who’s employed as a contractor,” he said.
“People were actively encouraged to take that par ticular route, [but] when they have been told they’ve gone the wrong way it makes for a very, very confused market for the consumer, which is always a concern.”
“Borrowers dip into our market every three to five years, and they forget everything that we’ve told them before, so they just assume everything is as it was,” he said, adding that educating the client is also part of the Calderpuzzle.suggested there was a conflict of interest, with clients wanting to “minimise tax but maximise borrowing,” while brokers followed the rule that “you can only lend on what someone pays tax on.”
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Due to the complexity of a contractor’s work history, both Matharu and Spreadbury suggested adopting a more flexible approach that was far removed from a computer’s tick-box system.
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“The real difficulty seems to be from a legislation point of view –there don’t seem to be any hardand-fast rules” JODI SPREADBURY
Stewart, who came out in defence of lenders, saying “We’re all in this together,” agreed on the need to keep criteria as simple as possible, while defending manual underwriting.
“If the broker doesn’t know what an IR35 is, it will lead to some significant mistakes going forward, which won’t help anyone in the industry.”
“It’s endemic within the industry, and they’re the ones who can sometimes misunderstand the client information and send the wrong application to the wrong lender,” he said.
“If you’re feeling like you’re a bit out of your depth with it, pass it on, [because] our clients in this area need expert knowledge. They need that attention to detail, they need that care, and you need to be competent in what you’re doing,” she said.
take a similar, flexible approach, in contrast to what was happening among some lenders.
As such, holiday pay should be excluded in any in come assessment, he added. “What’s important for us is to try to make the rules as clear as possible – that’s why we have manual underwriting,” he said.
HOW LENDERS CAN CHANGE
Matharu, however, said that while it was important for brokers to keep on top of current legislation, if it wasn’t a broker’s area of expertise, ultimately it would be wiser to hand the task to a more experienced person.
“Bearing in mind that IR35 has been compulsory for a year and a couple of months, there are lenders out there who say they will only consider contractors if they’ve been under the umbrella company for at least 24 months, which is just ridiculous.
Wallace concurred, saying such an egregious lack of knowledge could have “serious implications” for contractors, as it might prevent them from getting mortgages in the future.
Summing up from the industry’s point of view, Calder said “clarity of thought” regarding policy on what is acceptable as income was paramount, re gardless of whether borrowers are self-employed as traditional contractors or have set themselves up with an umbrella company.
Stewart to remark, “My concern would be that this industry is full of one-man bands. ‘Fred in the shed’ who doesn’t see daylight, doesn’t have a BDM, probably hasn’t got internet.
“If I’m saying to you that this guy has been a con tractor for 20 years, he’s never been out of work for longer than three or four weeks, and you can see con sistently for the last two decades he’s earned more than a hundred grand a year and never missed a mortgage payment – why would you not give him a mortgage if he’s got a contract in place? We’re not saying treat them completely different from somebody who’s bog-stand ard employed or somebody who’s self-employed, but don’t be so black-and-white with the criteria when this isn’t,” she pointed out.
He continued, “We need to turn this on ourselves and shine the light on us as well to make sure that we’re educated to the best of our ability to make that process for the client, the broker, and the lender as smooth as possible.
Calder agreed, saying, “If the information put into the system doesn’t match what we take as income, you’re just going to get into this never-ending cycle of ‘he said, she said’ on how much the customer can borrow. Go to someone who really understands the market and understands the nuances.”
Stewart echoed the view, saying, “If it’s not your bag, it’s not your remit, refer away. It all goes back to education.”
MORTGAGE APPLICATION PROCESS ROUND TABLE to 85% LTV available for like-for-like remortgages
He said, “Mortgage broking is not a digital process, and it’s unlikely to ever be. You’ll have technology that can do lots of heavy lifting, and we embrace that, but the heavy thinking will always come from humans, and we miss physical BDMs.”
Reaching a point of inflection, he said that many of the delays that brokers were witnessing with certain lenders were “also from poor broking practices.”
This could include setting up a separate department that focused solely on contractors – a team that would
Up
A flexible approach needed by lenders and brokers, as there’s no one-size-fits-all for contractors, and IR35 is a specialist field
KEY TAKEAWAYS
MORTGAGE APPLICATION PROCESS
Simplicity, speed, and clarity of thought regarding what is acceptable as income are key Manual underwriting is inevitable for customers in this case
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For his part, Stewart advised both brokers and lend ers to respond quickly to a mortgage application.
Justin Wallace is the business development manager at Barclays intermediaries. He has spent 17 of his 30 years in finance at Barclays.
“[T]here is a lot of confusion [about the IR35]. It often fuels anxiety, and that’s a word that tends to pop up with my contractor clients”
has been director of mortgages at Barclays since 2013. He formerly worked as head of tracker mortgages at Ulster Bank, and headed the mortgage department at the Royal Bank of Scotland. He was also marketing manager at both Alliance & Leicester and Abbey.
Brokers and lenders need to be up to speed with changes in tax legislation, but should never shy away from consulting experts who understand the market and its nuances
“It doesn’t matter if you’ve had a limited company set-up before and then go on to an umbrella company set-up – we’ll base it on the three months’ pay slips, but it’s the same as [with] any employed person. We need to treat customers fairly,” he said.
“When it comes to underwriting, if the words and numbers don’t match up, then, actually, the loan could be declined, or it could be much, much lower. For me, it’s the umbrella company piece and the income structure.”
Asked what advice they would give to brokers who have clients dealing with these changes, Calder once again pressed the point that “simplicity is key.”
Martin Stewart is a mortgage veteran with more than 30 years’ experience, having founded London Money. He is also the director of the financial services company.
Wallace pointed out that as the new rules were push ing ever-greater numbers of contractors “down the umbrella route,” there was a need to adopt a simpler approach. From his and Barclays’ perspectives, that meant relying on a person’s last three pay slips.
TheCraigPanelCalder
Jodi Spreadbury is the senior mortgage and protection adviser at The Mortgage Broker, a post she has held for more than 17 years.
Matharu urged mortgage professionals to steer away from the black-and-white, approach as contractors’ cir cumstances often change, while Spreadbury called on brokers to keep up with their education if they wished to consider themselves specialists in the field, suggesting webinars as a good way to update their criteria.
SONYA MATHARU
“Within 10 questions, a good broker knows what’s going to happen with a mortgage with probably 90 per cent accuracy.”
He said, “If the payslip structure is as simple as possi ble, that will make it easier for the broker, the customer, and the lender in that space. Be really clear about the journey and say we will allow you a six-week gap, but beyond that you’re back to square one, particularly in this market. Having sight of a straightforward income always makes it easier for a lender.
ROUND TABLE
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A separate department focusing solely on contractors would be welcome
Sonya Matharu is an award-winning senior mortgage broker at The Mortgage Mum and a company owner. She joined The Mortgage Mum in 2020; prior to that, she was a mortgage advisor and processor at Shore Financial Services for over four years.
WHAT ROLE CAN BROKERS PLAY?
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com36
Barclays Bank UK PLC. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 759676). Registered in England. Registered no. 9740322. Registered office: 1 Churchill Place, London E14 5HP.
Supporting remortgagesconfident With flexible criteria and competitive products, we can fully support you and your clients. • Offers are valid for 6 months from the date of application • Cashback is available on selected products • Up to 85% LTV available for like-for-like remortgages Contact your Barclays support team or visit barclays.co.uk/intermediaries to find out more Make money work for you
FEATURE MARKET
BoE scraps affordability test – what do the experts say?
Is it a significant decision or not?
The test was introduced in 2014 to calculate a potential borrower’s ability to repay their mortgage if interest rates jumped by up to three per cent. The move was intended to tighten up lending rules in the wake of the 2008 global financial crash.
for current and future affordability and must still stress-test those calculations before granting any loan.
It is thought that by withdrawing the test, some prospective borrowers, such as the self-employed or free lance workers, will now be able to access loans, although the strict loan-to-income (LTI) ratio, which is set at 4.5 times a borrower’s salary, will still Accordingapply.to the BoE’s Financial Policy Committee (FPC), the LTI flow limit will do a better job of “guarding against an increase in aggregate household indebted ness … than the affordability test,” adding that the removal of one of the two layers of checks will still provide enough security for both the economy and individual borrowers.
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“But despite rates currently rising, most economists and forecasts suggest the base rate is unlikely to go above three per cent. What these changes do is ensure that borrowers’ affordability is not stressed at unreal istically high levels and [this] should help certain borrowers feel less penalised. It may also, for example, help address the current need for some to take longer terms in order to fit with Harinderaffordability.”Chohan,mortgage policy manager at the Building Societies Association, said the move could
He said, “Responsible lenders will continue to assess a borrower’s affordability to make sure they do not lend more than someone can afford to repay, and the loan-to-income limits – the main influencing factor for affordability – isn’t changing.
38 MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com
ortgage professionals have played down the significance of the Bank of England’s (BoE) decision to scrap the mortgage affordability test.
[T]he BoE’s Financial Policy Committee [says] the LTI flow limit will do a better job of “guarding against an increase in aggregate household indebtedness … than the affordability test”
However, although it will be up to lenders to decide whether to relax their own rules, critics have said that the rapid rise in interest rates, coupled with the scrapping of the affordability test, could result in more borrowers getting into financial trouble farther on down the line.
“That said, I think it’s a logical decision, as the market is in a very different place from that which immediately followed the financial crash. Lenders fully assess mortgages
Jeremy Duncombe, director at Yorkshire Building Society (YBS) and Accord Mortgages, said that while YBS supported the BoE’s removal of the affordability test, he did not expect borrowers would see “any significant changes.”
Mortgage Introducer reached out to industry professionals for a reaction to the BoE’s move.
Stefan Boronea, co-founder of Proportunity, was more forthright, saying that homeownership will remain “near impossible” for first-time buyers who only have a small deposit.
He said much more needed to be done to make homes affordable to
“While removing the mortgage affordability test is a move in the right direction, the loan-to-income limitations still make homeownership impossible for first-time buyers who are struggling due to the cost-ofliving crisis and a spiralling increase in rent,” he said, adding that rising interest rates will strain affordability “even further.”
Simon McCulloch, chief commercial and growth officer at Smoove, said the BoE’s decision to scrap the affordability test would help to increase affordability and borrowing power for first-time buyers, although removing part of the safety net in the current environment was “a risky move … at a time when the cost-of-living is rising, along with base rate rises.”
David Hannah, group chairman of Cornerstone Tax, described the BoE’s move as “an interesting decision” that would not change the way lenders provided mortgages.
However, he stressed that lenders should still assess affordability “care fully” and in line with rising rates.
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“Responsible lending will prevail, and there will be no free-for-all,” he added.
help some people achieve the size of mortgage that they need, adding that it would reduce administration for mortgage lenders over time.
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But he warned that it could lead to higher house prices, as it would cause “increased levels of demand.”
the next generation if a “generational catastrophe” were to be avoided.
“Innovation must continue across the mortgage industry, and much-needed support must not be removed or stifled as prices continue to skyrocket and incomes fail to keep up,” he added.
“What we’re doing is creating a very fixed programme, where, if they
The Nationwide Building Society and Fair by Design Fund, which invest in companies seeking loans and equity funding up to Series A, announced they would be backing what is reputedly the UK’s first open-market, rent-to-own program for first-time buyers.
follow it step by step, and that’s pay ing their rent, putting their savings away, and doing it for 36 months, they’ll end up with a 10 per cent deposit at the end of the 36 months, and with a much better credit pro file, because we’ll have been contrib uting toward that with the reporting. And they’ll be in a position to move from using Kettel to a repayment mortgage at the end of those six months,” Stunden explained.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com40 INTERVIEW
Kettel Homes will not, however, work with anybody who has had an IDA or has been declared bankrupt –for now, at least.
Once a customer submits the property for review, Kettel’s property acquisitions team qualifies the home, looking at between roughly 100 and 125 data points to determine whether it’s investment-worthy.
Once that’s done, Kettel provides the customer with a clear view of the maximum purchase price, which could either be the maximum value Kettel would be willing to pay for the home, or the maximum for their budget.
Kettel fixes the repurchase price for the customer so they know how much they will need to pay in rent savings and what the repurchase price will be in 36 months’ time.
“We’re actually giving customers the opportunity to start building out their credit because we report all of their rental income to the three major
uly proved to be a landmark moment for Kettel Homes, a tech-based rent-toown platform headed by Canadian entrepreneur Trevor Stunden (pictured).
Before Kettel Homes makes an offer, the monthly rental payment is fixed for the first 36 months. The customer is also told how much they’ll need to save in addition to the rent, as the rent does not go toward the purchase of the property.
The purchase price is fixed from day one, based on a three per cent annual appreciation rate. So if the customer bought a house for £100,000, Kettel Homes would resell it to them for £109,273.
“Helping people get their foot on the ladder is the greatest way to establish wealth”
Potential first-time buyers interested in the programme approach the firm directly, the only requirement being that they place a minimum deposit of two per cent on the home.
TECHNOLOGYJ
They go through a fairly standard application process before they can begin searching for their property, as long as it’s an existing freehold single-family home priced between £125,000 and £400,000.
Stunden, the firm’s CEO and co-founder, hopes this will be the first step in a revolution to empower first-timers who are not normally able to access traditional home financing.
Entrepreneur on innovative rent-to-own platform
“It’s very significant for us, in that Nationwide obviously has a track record and a level of respect in the homeownership sphere that very few other organizations have. It gives us a level of confidence that other people wouldn’t otherwise be able to get,” he told Mortgage Introducer
Stunden added that customers with “some level of adverse credit,” such as a County Court Judgment (CCJ) within the last six years, would be accepted – “as long as [the judgement is] satisfied and below £500.”
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Stunden explained, “Those firms had quite a low conversion rate, and the reason why is because the types of customers they were focused on were generally people who historically had really bad credit and put themselves in an adverse situation – and this is not something that we were going to do.”
in year four. Once it gets up to scale, the plan is to increase substantially, to 10,000 homes a year.
Kettel Homes team
So it’s no surprise that Kettel Homes’ programme is similar to those launched by tech start-ups in the US in recent times, although with some notable differences.
The data says as much. According to figures provided by Kettel Homes, the most recent English housing survey found that young people between the ages of 25 and 34 have seen a 25 per cent decline in home ownership rates compared to 20 years earlier, despite 48 per cent of first-time buyers saying homeowner ship is more important as a result of theWithpandemic.thegovernment failing to meet its own home-building targets, and property prices still rising to re
credit-rating agencies,” Stunden added. “[We’re also] giving them that time and space they need in order to establish the accounts that they would otherwise need when they’re going to get a repayment mortgage.”
cord levels, the UK’s housing sector is uncannily reminiscent of the US mortgage market, where low inven tory (at least until very recently) and soaring home prices have also kept would-be first-time buyers at bay.
“Helping people get their foot on the ladder is the single greatest way to establish wealth here in the UK. It’s also the best way to alleviate poverty in the country,” he said.
There is unquestionably a market for first-time buyers, an underserved sector that is finding it increasingly hard to get on the property ladder.
41www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER INTERVIEW TECHNOLOGY
And although the catchment area is currently limited to outside London in addition to Birmingham, Coventry, and Nottingham, the idea is to ex pand to the rest of the country within twoForyears.Stunden, the scheme goes far beyond a mere business venture.
Stunden has ambitious plans for Kettel Homes. Within two years, the firm is looking to buy its first 1,000 homes, increasing that to 2,000 homes by year three, and to 5,000 homes
“By establishing the tenancy rights that you have as a homeowner versus being a renter, you can start to invest both in your family and yourself in the community. There are studies that show there is actually a decline in crime rates within communities that have increased rates of homeownership.”
TECHNOLOGYI
t’s no secret that self-employed people have a tough time when it comes to obtaining credit and, indeed, a mortgage.
A company determined to champion their cause is Tink, a European open-banking platform that recently carried out research on
Proving that self-employed people can pay regular bills on regular credit was key, he said.
Proving that you can afford to pay your bills on a regular basis can be a far bigger challenge for self-employed people than for standard borrowers, and their cause is not helped by having to comply with traditional credit checks and worthiness assessment models that invariably fail to take into account complex credit histories.
Jan van Vonno
But the self-employed are an underserved sector the mortgage industry can ill-afford to ignore. The gig economy has grown substan tially in recent years, despite a blip at the height of the COVID pandemic.
“That’s the particular problem that currently keeps them from getting a mortgage with a financial institution. The second one is their ability, or inability, to show that they’ve been able to meet debt obligations in the past,” he added.
“Antiquated” checks failing underserved borrowers – head
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com42 INTERVIEW
It showed that over a quarter (28 per cent) of the UK’s self-employed said they struggled to access financial services. Almost the same percentage (27 per cent) said they felt they had been actively discriminated against, and a third (33 per cent) claimed their employment status was an obstacle to securing a mortgage.
“Our mission is to enable a new world of finance, one that is datadriven. The technology that we take to market, using open-banking capabilities, allows us to rethink what affordability checks look like or what a credit worthiness assessment model does and how effective it is,” he told Mortgage Introducer
the topic, revealing some startling facts about the self-employed.
According to government data, 15.3 per cent of workers in the UK were self-employed in 2019, while figures released by Simpletax showed that 4.95 million people were registered as self-employed that year, rising to more than five million at the start of 2020.
Jan van Vonno, Tink’s head of industry strategy, said it was proof that the current credit risk checks, based on “antiquated” paper-based models, should be replaced by more efficient, tech-driven platforms to enable faster and more accurate credit decisions.
Although the pandemic reduced that number to 4.56 million by August of that year, the same research by Simpletax said that one in five young people aged 16 to 21 expected to become self-employed, showing that there is huge potential for this segment of the market.
He’s leading a revolution for the self-employed
Nonetheless, he insisted that techdriven platforms were a crucial tool for lenders, adding that they would play an increasingly important role, more so as economic conditions become tougher for“It’sborrowers.aboutanticipating one’s ability to afford credit in the future,” he said.
Our reputation is built on transparency, accountability, and delivering exceptional service. We are committed to forging strong relationships and every day our team goes above and beyond to enable us to truly support the broker community and ensure that we are doing business in a way that puts them first andenquiries@mt-finance.comforemost.www.mt-finance.com02030512331
#SFIAwards sfiawards.co.uk
processes for the credit institution.”
43www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER INTERVIEW TECHNOLOGY
The firm, which already collaborates with more than 3,400 banks and financial entities across Europe, including NatWest, appears to be on a firm financial footing.
In June 2021, Tink was acquired by Visa in a deal reputedly worth €1.8bn. At the time, Charlotte Hogg, CEO of Visa Europe, said the acquisition would help the firm to fast-track innovation in openVanbanking.Vonno, however, conceded that a totally seamless, paper-free experience
was not yet possible, and that some level of manual underwriting was still needed.
“What if the cost-of-living crisis does even more damage to the ecosystem? What if interest rates grow even more? What are the implications for a lender under those circumstances? The technology that we take to market gives a much, much more detailed under standing of one’s cash flow or one’s risk elements in the present – and potentially for the future.”
He revealed that Tink was currently working on launching a product to help assess cash flow and expenses, adding that the focus was on “eradicating financial anxiety and enabling financial wellbeing.”
“Today, this is still the case, so there’s still a heavy reliance on the credit-reference agencies,” he said. “But complementing this with open banking capabilities will lead to more intuitive experiences for the selfemployed, while creating more efficient and optimal journeys and application
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“The technology that we take to market, using open-banking capabilities, allows us to rethink what affordability checks look like”
Since launching in 2008, our approach to lending is something we have been consistently recognised for within the financial services industry.
Explaining how the bank retains existing customers, McCullough said it offers a simple product-switching facility that allows customers to switch in advance at a loyalty rate via their broker.
Matt McCullough
How to obtain and retain more clients
O
btaining and retaining customers is an important part of any successful business – even more so right now, given the financial climate.
“We have a pocket in the market where we operate and it is not necessarily everyone’s first choice,” McCullough added.
Matt McCullough, national sales manager at Aldermore Bank, explained that the bank obtains new customers via product distribution to its intermediary partners.
Educating the market, as well as customers, is key
INTERVIEW GROWTH
The application journey for a broker is heavily backed by technology now, too – from sourcing products across the market to using desk-based valu ations when applying to in-life CRM platforms to helping keep brokers up to date with all customer movements.
“We all live with our phones in our hands now, and this is proving to be an easy but successful way to build a brand and attract a loyal following,” he said.
Looking to the future, McCullough said that while he is optimistic, he can see that it’s looking likely there will be a small downturn in activity in the tradi tional mortgage space.
“That said, the product transfer market is more buoyant than ever, and with the cost-of-living and rate rises being a major issue, switching to secure a loyalty product right now seems top-of-mind for many,” he added.
“That is the professional way to say we sell our proposition to brokers who then send our products to their clients when it is suitable to do so,” he said.
Technology is another vital cog in acquiring and retaining customers, McCullough said. From a lender perspective, cleverly laid-out adver tising and targeted ads based on cookies and site usage have meant the bank can retarget brokers who have shown an interest in its offering.
“We mail customers and brokers in
[McCullough] believes Aldermore Bank stands to help those to whom the big banks say no, such as the self-employed and those with minor credit blips
THE ROLE OF TECHNOLOGY
McCullough said the work really starts with his team, which he explained is doing a tremendous job on a daily basis in educating the market on who the bank are, how it can help, and how to apply.
He believes Aldermore Bank stands to help those to whom the big banks say no, such as the self-employed and those with minor credit blips.
advance, notifying them of what is on offer as their fixed rate comes to an end,” he explained.
44 MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com
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McCullough outlined that one of the best ways of attracting new customers is via short-form video content.
The cost-of-living crisis has put a real strain on finances. As such, providing customers with the correct advice and guidance is essential.
Company registered in England and Wales No. 7240896. Pure Retirement Limited is authorised and regulated by the Financial Conduct Authority. FCA registered number 582621. SpecialistsMorLifetimetgageWeassignadedicatedunderwriter to all our lifetime mortgage cases, laying the foundations for a smooth application process.
During a cost-of-living crisis, Izard asserted that this is the perfect scenario for graduates, as they will quickly be able to start providing for themselves straight out of university.
GROWTHU
Izard noted that companies have been taking on apprentices in non-custom er-facing roles, such as HR and IT, for years; now he believes apprenticeships in customer-facing roles are an import ant step for the market.
Peter Izard
WHAT ARE THE ADVANTAGES?
Looking to the benefits of apprentice ships, Islam pointed to the freedom the schemes offer, as well as the ability to learn and earn.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com46 INTERVIEW
He noted that this provides the best of both worlds, and said that often companies contact these individuals after the completion of their degrees to offer jobs, which means they can go straight into employment following the completion of their university courses.
He also noted that apprenticeships provide an opportunity that offers
Izard explained that employment is changing and people are moving away from the ‘snob’ factor.
He noted, “It is good for companies to accept multiple options, and the benefits of both are there for all to see; however, some companies, of course, will still demand degrees from redbrick universities.”
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“Theexisted.apprenticeship scheme was perfect for me, and offered an alternative to the university route – the scheme has enabled me to learn on the job and to help provide for myself while also gain ing experience,” Islam said.
Peter Izard (pictured), head of intermediary business development at Investec, explained that appren ticeships offer a long-term solution, as well as showing a desire to invest in a company’s own people. He pointed out that an apprentice does not come with preconceived notions of how operations should be carried out, which allows a company to help develop the individual in a way that best suits that
Apprentices are unburdened by preconceived notions
“An increasingly popular option for the younger generation is ‘sandwich’ university courses, as these offer the qualification of a degree alongside gaining experience within their chosen industry,” Izard said.
niversity degrees have long been considered the go-to approach to securing a job within the financial industry. However, apprenticeships also have their place.
While he acknowledged that within the apprenticeship scheme there are qualifications that must be completed, Islam said that revision for the exams is done through gaining experience of the industry – which worked better for him.
Looking ahead, Izard said that he would like to see more lenders taking on apprentices, and is confident that they will see the benefits straight away.
different skills from those acquired by standard graduates, such as being geared toward hands-on learning rather than purely academic knowledge.
Solving the mortgage talent crisis – are apprenticeships the key?
“Apprenticeshipbusiness.schemes offer an alternative to graduates, and I believe it is best to combine the two, as it enables a company to receive two different streams of individuals,” IzardZulfisaid.Islam, apprentice business development manager at Investec, explained that the apprenticeship scheme Investec offers provided him with an opportunity he was not aware
Apprenticeships offer the opportu nity to learn on the job and prioritise experience, although one must, of course, also complete qualifications along the way.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com48 INTERVIEW
Korman also noted that commer cial property seems to be holding strong and pointed toward reinvest ment in the high street.
GROWTHT
However, 64 per cent of prop erty professionals remain confident about their business over the next 12 months, according to a webinar poll undertaken by Countrywide Surveying Services (CSS).
Property markets UK: How are they dealing with uncertainty?
he financial market within the UK is enduring a difficult period, with inflation reaching a new 40-year high, alongside the cost-of-living crisis. On top of this, the Bank of England (BoE) upped the base rate from 1.25 per cent to 1.75 per cent at its most recent Monitory Policy Committee (MPC) meeting.
With all this uncertainty, he believes the prospects for the economy look bleak; however, he noted that the property finance market is looking a little more positive.
Brexit, COVID, the invasion of Ukraine, the cost-of-living crisis, base rate raises, inflation – what’s next?
He explained that COVID, Brexit, and the invasion of Ukraine had driven up the cost of living, pushing inflation to 9.4 per cent. He outlined that both are expected to rise further in “The2023.Bank of England has reacted by raising rates, which is, again, expected to keep increasing. More recently we have seen disruption in parliamentary leadership take its toll on the economy, too,” Korman said.
House prices are still rising, and in a recent report published in July, Nationwide said price growth accel erated to an annual rate of 11 per cent. According to another research report, Korman explained that London housing in H1 2022 was stronger than it has been since 2014.
means I expect to see more property developments come to fruition, and subsequently more development finance. Indeed, our development finance loan book has been increasing recently,” he claimed.
“The revival of the high street and a newfound passion for the local community mean businesses that have navigated through COVID-19 have begun to stabilise. The office market looks like it might be rebounding, too,” he said.
“Demand for finance remains high, as illustrated by unregulated resi dential bridging loans making up a significant portion of our loan book,” heAccordingsaid. to Korman, while interest rate rises are a concern, borrowers and lenders alike are pricing this into their appraisals.
Eli Korman
around the corner,” said Eli Korman, head of development finance and CIO at TAB.
“Record months of demand for our bridging and development products suggest there are plenty of opportunities out there for property investors,” he concluded.
“The undersupply of UK housing, coupled with construction costs having seemingly levelled out,
Although directors have adopted hybrid working, Korman said that employees are demanding greater health and wellbeing initiatives that are being built into office infra structure. Strong demand for more environmentally sound workplaces is also driving the rebound. As such, he said the market has seen some large commercial loans reach completion to support business progression.
“Just as the UK thought it had negotiated Brexit and navigated the worst of COVID-19, little did we know there was further uncertainty
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As for the property financial markets, Korman said alternative flexible lenders with committed funding lines and the ability to make quick decisions have become particularly useful funding solutions in times of uncertainty.
MORTGAGE INTRODUCER Champion of the Mortgage Professional SPECIAL REPORT The Top Mortgage Employers have provided better benefits and working conditions to help employees cope with a higher cost of living CONTENTS Feature article ..................................................................... 50 Methodology 51 Top Mortgage Employers 2022 54 www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER 49 EMPLOYERSMORTGAGE Top 2022
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MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com50 BUSINESS STRATEGY
t’s no secret that salary demands in the mortgage industry, like many others, have significantly increased recently due to an obvious cost-of-living crisis.
TOP 10 MOST IMPORTANT CRITERIA FOR SURVEY RESPONDENTS (1 = not important, 5 = most important) Bonus/incentive programmes 3.963.963.984.044.084.094.234.314.544.57Flexible work options Employee recognition programmes Retirement AboveEmployeePerformanceplanreviewsteambuildinggovernment-stipulated paid leave Medical Family-friendlycoveragebenefits (parental leave, childcare, etc.) Life insurance TOP MORTGAGE EMPLOYERS 2022 SPECIAL REPORT
Naomi Braisby, Landbay
Government help looks unlikely to be coming to mitigate spiralling wage demands, as prices rise at their fastest rate for 40 years. The Trades Union Congress has also issued a call for the new minimum wage to be £15, a significant rise from the current level of £9.50 for workers over 23.
“We continue to look at the market and run benchmarking activities, at least twice a year, ensuring people are paid fairly for the work they do”
Prevailing during
www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER 51
Naomi Braisby, human resources director at Landbay, one of the Top Mortgage Employers this year, says, “We continue to look at the market and run benchmarking activities, at least twice a year, ensuring people are paid fairly for the work they do.”
Mortgage Introducer asked the winners about their experiences regarding salary demands over the past 12 Jonathanmonths.Sealey, chief executive of Hope Capital, outlines that he has seen a significant shift in the number of contractors applying for permanent roles.
DEMANDING MORE
43% of survey respondents are highly satisfied with their overall compensation 20% of companies have 101-500 employees 32% of survey respondents are in the 30-39 age group
tough times
The process of identifying the best employers in the UK mortgage industry took place over two phases. First, Mortgage Introducer invited organisations to submit their details through a survey, where they were able to describe their offerings and business practices. Then, employees from the nominated companies were asked to fill out their own anonymous survey to rate their satisfaction with a number of key factors such as compensation, employee development, culture, and work environment. Each company was required to meet a minimum number of employee responses based on overall size. Companies that achieved a satisfaction rating of 80% or greater were included in the Top Mortgage Employers list.
As such, keeping in line with positive wage growth is increasingly important as the market seeks to retain those in the sector.
Sealey adds that the business has invested in a comprehensive benefits package and has plans to extend this further in the future.
Research conducted by Mortgage Introducer has revealed that mortgage industry recruitment consultants have seen very large hikes in salaries.
Rob Brooks of Consegna Recruitment admits that those in the industry know they can demand more,
METHODOLOGY
“Our average has gone from about £28,500 to £35,000, but I’ve put in the last couple of weeks, I’ve put in brokers anywhere up to £60,000, because the market is tight,” says Marcus Nanson, director of NRG Resourcing.
For him, paying a premium is a smart move. “I think it’s the most important thing to pay for the best, rather than a group of average mortgage advisors,” he says.
Over the past 25 years, the number of individuals in the mortgage market has shrunk drastically, with Mortgage Introducer’s data revealing a drop from 500,000 to around 25,000 today.
“Our competitive package is benchmarked against industry leaders, and we continuously adapt to the market to offer a fair and competitive salary, which is vital for retaining and attracting top talent,” he says.
“We have had minimal pay rise requests from our team of 50+ staff since then,” he adds.
RESPONDENTS’ PERIOD OF EMPLOYMENT IN THEIR ORGANISATION
Jonathan Sealey, Hope Capital
15%
and he explains, “Salary demands have certainly increased and in some instances have been pretty, pretty extraordinary. So essentially if they know they are wanted, they’ll put quite high salary demands outAtthere.”Landbay, Braisby explains they have increased salaries across the board over the past year. “This is due to a number of factors, not just the increase in the cost of living, but also the employment market is very active, with many good quality individuals that can command a higher rate,” she adds.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com52 BUSINESS STRATEGY
“Whilst COVID has resulted in the Great Resignation as people pursue their dreams, we are in a fortunate position as we are still growing
31%
Less than 1 year 28%
TOP MORTGAGE EMPLOYERS 2022
“We felt this was the right thing to do in a bid to support all our team through the cost-of-living crisis,” she says.
1–3 years
In addition to the salary reviews and benchmarking activities, Braisby reveals that this year, Landbay awarded everyone an additional £693 to cover the increased energy bill costs, as calculated by Ofgem.
Employees of Mortgages for Business work one day a week from home. So, Richardson outlined how last year, the company proactively paid a winter fuel allowance to help all staff with their increased fuel costs.
Gavin Richardson, managing director of Mortgages for Business, says at his company, salaries increased in January 2022 as part of its annual pay review, alongside the allocation of
“Despite the financial challenges associated with the cost-of-living crisis, our market remains strong, and we are continuing to see unceasing growth”
the business,” she Dolman-Thomassays.outlines that recruitment is still an important area for HL Partnerships. “Salaries remain very competitive, so getting the right person is now more important than ever,” she adds.
More than 10 years
bonuses and a few share options.
3–5 years
11%
15%
SPECIAL REPORT
Jenny Dolman-Thomas, human resources manager at HL Partnership, explains that over the past 12 months given the lingering effects of the pandemic and the cost-of-living crisis, she has seen an increase in salaries, along with employees seeking pay rises.
5–10 years
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“We regularly review our brokers’ remuneration to ensure we provide a competitive industry package; as such, we are currently looking to introduce a new incentive scheme to recognise our overachieving brokers,” says Gavin Richardson, managing director of Mortgages for Business.
The average weekly earnings for total pay was £601 and regular pay was £565 in May 2022, showing a steady increase over time, except in the early part of the coronavirus pandemic, according to the Office for National Statistics (ONS).
MORE TROUBLE AHEAD
Richardson believes it would be short-sighted to solve a short-term problem by increasing everyone’s salary in line with current inflation rates.
“Most businesses would not survive if they increased wage bills by 11% to match the spiralling inflation costs. What would happen when inflation falls back to government target levels? Do businesses initiate 8%-9% pay cuts and expect staff to stay?” asks Richardson.
“I am expecting exceptional uncertainty, we will continue to closely monitor the economic outlook and adapt our offering based on reflecting expectations and an adaptive market that will align to our projected and ambitious growth plans,” Sealey says.
WHAT’S NEXT?
The economy also contracted by 0.1% in the second quarter of the year, according to data from ONS. As a result, the Bank of England has forecast the UK will fall into recession towards the end of the year as energy costs soar.
“We are reviewing a similar scheme this year to help with the energy cost increase due in October. I believe these additional benefits provide tangible support to our staff beyond the salary we offer,” Richardson says.
“I think wages will steadily rise in general, but some industries may drop depending on how much of a recession we fall into,” says Dolman-Thomas.
The cost-of-living crisis is only expected to worsen, with the energy price cap predicted to rise once more in October (a projected hike of £830) and again in January 2023, so future wage demands are expected to continue in an upward trajectory.However, real wages are falling. Data published by the ONS shows a drop of approximately 3% between October 2021 and June 2022 – the highest in over two decades.
“Despite the financial challenges associated with the cost-of-living crisis, our market remains strong, and we are continuing to see unceasing growth,” addsWithSealey.economic turmoil on the horizon, Ryan Venner of Premier Jobs UK feels there is a way for the mortgage industry to weather the recruitment storm.
“We regularly review our brokers’ remuneration to ensure we provide a competitive industry package; as such, we are currently looking to introduce a new incentive scheme to recognise our overachieving brokers”
Despite the expected increases to annual earnings, UK inflation is at a four-decade high once again as the Consumer Prices Index (CPI) rose to 10.1% in July, up from 9.4% in June.
As such, he expects more creative solutions and total remuneration, including benefits and rewards, should be Richardsonconsidered.goeson to explain that a higher salary does not always compensate for a better employer. He explains that providing a more attractive environment for staff, greater flexibility, better working conditions, and clear career progression are often just as, if not more, appealing to employees.
Gavin Richardson, Lloyds Banking Group
“I see growth in employed advisor recruitment, so that there’ll be more employers offering salaried roles to try and recruit advisors.”
The future is impossible to predict. However, Braisby outlines that Landbay is still planning to continue growing its team.
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He says, “I see companies that are willing to recruit trainees doing well and growing their teams considerably, because there’s a big pool of candidates out there of individuals who want to get into the industry.”
Looking at the data on a monthly basis, CPI rose by 0.7% in July 2022, compared with a rise of 0.8% in June. The Bank of England has revealed that it believes CPI inflation is expected to rise further in the remainder of 2022, although the bank thinks it will begin to drop in 2023.
Skipton International
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MORTGAGE EMPLOYERS 2022
Phone: 01252 365 205 Email: joanne.tripp@chl.org.uk Website: landmarkmortgages.com
Top
Phone: 0345 345 6788 Email: enquiry@mortgagesforbusiness.co.uk Website: mortgagesforbusiness.co.uk
Landmark Mortgages
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Phone: 01252 365 205 Email: joanne.tripp@chl.org.uk Website: chlmortgages.co.uk
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Phone: +44 (0) 20 7060 1234 Email: info@mfsuk.com Website: mfsuk.com
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55www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER THANK YOU FOR YOUR NOMINATIONS From everyone at Mortgage Introducer, we would like to thank our readers for the incredible response to the brand new nominations process we introduced for this year’s Mortgage Introducer Awards. We have seen an extraordinary number of entries submitted, packed with inspiring stories, fascinating updates and record-breaking results from businesses and individuals from across the UK mortgage market. Excellence Awardees will be announced in October. Winners will be selected by an esteemed, independent judging panel and revealed during the awards ceremony on 28 November 2022. Good luck to all of the nominees. #MIAwardsUK www.mortgageintroducerawards.com AWARD SPONSORS BE PART OF THE CELEBRATION For table reservations and sponsorship opportunities, contact matt.bond@keymedia.com. MONDAY 28 NOVEMBER 2022 • OLD BILLINGSGATE, LONDON BRANDNEWPROCESS!EVENT PARTNER PLATINUM SPONSOR
Central heating thermostats have been firmly switched off throughout the summer, but once the colder weather approaches, the true cost of the everrising energy price cap will be felt.
Open banking will give advisers, lenders, and borrowers real-time insight into their financial makeup,
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com56 LOAN INTRODUCER SECOND CHARGE
That is even before the increase in fuel and everyday items has been factored in. With inflation at a 40year high and the average cost of a full tank of petrol exceeding £100, the surge in costs is likely to have huge implications not just for individuals but for the whole country. We must look to ease this.
The latest forecast from utilities consultancy BFY makes for sobering reading. It predicts the average household could face an energy bill of £500 in January alone.
In any given year, such an increase would have a substantial impact – but with many businesses and individuals still counting the cost of COVID, the hike for some could be financially devastating.
How open banking can help with the cost-of-living crisis
Open banking allows us to track a borrower’s bills and outgoings in real time. We can analyse how they are managing payments, and even predict the likelihood of them meeting their second-charge mortgage payments.
bills, such as insulating their homes. While these are helpful, we also need to look at the bigger picture – and the financial services industry has a part to play in this.
It won’t be long before the days of borrowers manually estimating their own monthly expenditure are gone.
to the average annual household energy bill reaching £3,420 in October, before rising again to an eye-watering £3,850 in January. This is compared to the current Ofgem price cap of £1,971 a year – which had already increased in April from £1,277.
Open banking paves the way for more informed and knowledgeable lending decisions, and could open up a host of products that have the potential to improve a borrowers’ financial situation – something that is urgently needed.
It also predicts that a drop in supply from Russia to Europe will contribute
A
s the UK braces itself for what will be a record winter for energy bills, it is vital we use every tool at our disposal – including open banking – to help the most financially vulnerable.
A lot of the focus so far has been on energy efficiency measures households can take to try to reduce their energy
Matt Meecham chief digital officer, Evolution Money
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While open banking may be gaining ground, we need to do more. Now is the time for us as an industry to move away from outdated systems and use the power of open banking – and encourage borrowers to do so also.
Even a small step such as having real-time access to all of a borrower’s outgoings in one place could not only lead to more informed lending decisions from providers but also help borrowers budget and make wiser decisions about their own financial situations.
As borrowers’ bank balances are increasingly tightly squeezed, it’s more important than ever to help those who may be financially vulnerable. According to StepChange Debt Charity, in June, the rising cost of living was cited as the most common reason for debt among its clients, with nearly one in five (18 per cent) alluding to it as an underlying cause of their financial problems.
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Technology can help put borrowers in the best financial position possible – not only helping them manage their debt and unsecured credit but also improving their financial standing when applying for a mortgage.
Open banking paves the way for more informed and knowledgeable lending decisions, and could open up a host of products that have the potential to improve a borrowers’ financial situation
How many borrowers regularly check comparison tools to switch to the best savings or credit card providers? Imagine a scenario in which borrowers were automatically transferred to the cheapest loan rate based on their financial profile. We are not far off from that.
As lending risks increase, we are likely to see more borrowers fall outside of high-street lenders’ criteria – even when, in practice, the product they are applying for could be affordable.
For instance, in the mortgage market, where advice plays a pivotal role, there are around 370,000 borrowers who could save money by switching from their lender’s Standard Variable Rate (SVR), according to the Financial Conduct Authority’s (FCA) latest findings. Yet, because of either timing or a lack of knowledge, they are not switching.
which will help ensure borrowers are on the most competitive product.
How many lenders will operate on a worstcase scenario basis this winter when it comes to assessing a borrowers’ affordability in light of rising fuel costs? Or still base their lending decisionmaking on a borrower’s credit score and historic financial information?
How many of these borrowers’ financial positions could improve if providers offered a more tailored approach to their finances?
s storm clouds begin to gather around the economy, and before we look at strategies to help our clients weather the turbulent conditions, we should look back with some gratitude that the conditions for borrowing of every kind have, up to now, been so stable for so long.
Brace for growth of consolidation enquiries
So, debt consolidation will soon likely dominate conversations between advisers and their clients. With house prices still at their most buoyant, the time to make the most of the uplift in property value to relieve cashflow and pay down expensive credit and store card debt is definitely now.
Lending figures for second-charge lending continue to grow. It is claimed that new business volumes are now surpassing the previous high set in 2007. I can only see volumes increasing as more homeowners aim to reduce outgoings and hunker down for the conceivable future. M I
The increasing cost of fuel, since the Ukraine/Russia conflict started, also feeds into cost-of-living rises, which in turn will have an even more negative effect on consumers’ ability to cope. With predictions of a rise of more than £1,200 a year in October from
Spare a thought for those borrowing on credit cards. In May, the Bank of England announced that credit card borrowing was rising at its fastest annual rate in 17 years, with many analysts suggesting that a recession looked increasingly likely as growing numbers of households go into debt to make ends meet. The annual growth rate for credit card borrowing hit 11.6 per cent in April – the highest figure since November 2005. Evidence suggests that one of the reasons for this is that more people are using
cards to shore up their finances.
How to deal with credit and store card debt is definitely going to be the overriding question heard by brokers over the last part of this year. Those fortunate enough to be homeowners, but who have used short-term credit to tide them over and then have watched those balances creeping up while the cost-of-living crisis gets worse, will be waking up to the danger of letting matters get out of hand.
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But increasing interest rates, the go-to lever for central banks when inflation starts to gather speed, have dispelled any thoughts that ultra-low rates in the mortgage market might continue. Fortunately, the majority of current borrowers (c. 80 per cent) are on fixed rates, so they are in no imme diate danger. However, those who have been on variable or tracker rates are already seeing the difference, and the rush to fix their rates is accelerating as those rates are withdrawn in favour of higher ones.
Tony Marshall EquifinanceCEO,
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With the summer holidays upon us (including those of MPs whose parliamentary recess only ends at the beginning of September), as well as the Tory leadership contest in progress, there may be less focus on the effects of interest rate rises. However, apart from trying to get away to forget temporarily about the economic bad news, cost-of-living rises are more difficult to ignore when your cash no longer goes as far as it did, even on holiday.
Rising interest rates and inflationary pressures, plus the rising cost of living, mixed with incomes remaining generally and stubbornly flat, are not a favourable recipe for the majority of consumers – especially those on vari able and tracker rates or whose fixed rates are coming to an end this year.
energy consultancy Cornwall Insight, the typical domestic customer is likely to pay £3,244 a year from October, then £3,363 a year from January. The typical bill at present is about £2,000 a year, having already followed a £700a-year rise in April.
I could pretend to you that it’s currently early September and suggest, “What a summer it’s been!” but the truth of the matter is that, as I write, it’s still summer, and we’ve just had record-breaking tempera tures that brought a lot of this country to a standstill.
SPECIALIST
UK weather is historically change able, but we must anticipate that what we’re likely to see in the future is a greater degree of flux in our weather patterns, and this must be incorporated into housing policy.
However (and I guess you could sense a ‘but’ coming here), we also have to acknowledge some truisms about the UK’s housing stock, and indeed ask the question of whether the methods we are using to secure, for example, net zero by 2050 are really going to be successful given the nature of the housing we have.
For example, as I think we will all be aware, currently the government is using the energy performance certificate (EPC) as its method of choice in securing change within housing. We’ve yet to hear the final rules, but the private rented sector is effectively being used as a guinea pig for securing the initial energy efficiency gains the government wants to see.
To say that the infrastructure and, indeed, the vast majority of UK housing stock are not built for heat in excess of 40°C would be an understatement, and while there are always going to be a few lunatic-fringe climate-change deniers suggesting these are merely a couple of hot days in a row, I’m sure it’s obvious to most that what we have experienced this year is much more significant than that.
FINANCE INTRODUCER SPOTLIGHT
As a start, I would say that the green agenda being pursued by our policy makers is morally and ethically right. It makes perfect sense to target housing, given it is one of the biggest polluters in terms of carbon output, and I think we would all agree that making our housing stock more energy-efficient – particu larly given the cost of energy right now
Steve Cox chief commercial officer, Fleet Mortgages
The EPC doesn’t actually show how much carbon a specific property is emitting. But there is the argument that the government has no other method by which to gauge improve ment and change in this area – so what else can it do?
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– is absolutely correct.
within properties that have hit at least EPC level C, with existing tenancies given a couple of years’ grace. For a country that has a vast amount of Victorian-era housing stock, this could be a significant challenge – but the fundamental question here is whether the EPC is even the right tool to hit the outlined targets.
What does ‘green’ mean?
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he nature of publication means articles like this one are required well in advance of the time when they’ll actually be read.
That being the case, it does bring into stark focus the need for change in terms of the new-build housing stock we create and how it must meet the requirements of more extreme weather. Of course, I’m not just talking about high temperatures in summer, but big shifts during other seasons – a greater risk of flooding, for example, or a greater chance of storms.
We’re pretty much stuck with the EPC as a method of green determi nation, which means we’re going to have a crude analysis that may well deliver crude solutions in terms of what property owners need to do to improve
We’re all led to believe that by 2025, new tenancies will only be allowed
more about lenders getting these properties onto their back books than about supporting improvement in housing stock.
But lenders are doing this because the government is also putting pres sure on them to show improvement in this area. It wants lenders to have more energy-efficient properties on their books. This is supposed to be a ‘stick’ approach to improving EPC ratings across the board, but it doesn’t really work if all lenders do is cherry-pick their loans against those properties already at the required levels.
SPECIALIST FINANCE INTRODUCER SPOTLIGHT
their EPC levels. This is why we have a lot of focus on heat pumps and the like, effectively meaning that, for example, landlords may have to shell out a considerable amount of money to move up the EPC grades.
Let’s also be honest here and say that, as lenders, we’ve not exactly covered ourselves in glory in terms of trying to support these owners and help them get their properties up to the necessary standards. Granted, we still don’t know officially what those might be.
or above. It means that a significant number of properties will need work carried out – and the next big ques tion is, How do you fund that?
And that’s where advisers will play a crucial role, because one point to understand here is that when it comes to securing a further advance on the buy-to-let mortgage, those lenders that are funded by the capital markets won’t be able to provide this. It’s not that they don’t want to, but the mechanics of securi tisation won’t allow it.
So-called green mortgages, as currently offered, don’t really fit the
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This means advisers will need to know who will provide a further
There is also a desire for more flexibility over how and when funds are released. Our policy is to release funds on a timescale agreed with the broker and the customer. We know from observing the market that a prescriptive process for release simply doesn’t work, and flexibility is not only desired but is now a requirement. Without it, the build comes under increasing pressure. If the solution is fluid and there is strong dialogue, then all parties can move efficiently to completion.
With the complex nature of this case, finding a lender proved difficult for the broker. We used our flexible, pragmatic, and sensible approach to assess and understand the application. After going through the necessary checks and processes, we were able to say yes – and there’s no better feeling. For every mortgage application we receive – whether its self-build, residential owner-occupied, lending in and into retirement, or development mortgages – we get great satisfaction from getting the deal done for our brokers’ customers.
M I www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER 61
LTVs up to 65 per cent considered, with 75 per cent available in the South East.
place, and more contractors and self-employed people are looking to build their ideal home. We are able to consider income, savings, and investments from various sources (UK-based and in sterling).
loans available up to £2m
up to a maximum of three properties being built on one title, for which one must be the subsequent main residence no maximum age
As a long-established lender in this sector, we have observed that selfbuilders are becoming increasingly perceptive when it comes to financing. They don’t just want a mortgage deal based on price; they are also looking for a product that meets their exact financing needs, and an expert lender to guide them through what is a complex financing situation. As such, it’s important for those looking for a self-build mortgage to partner with a lender that who can best accommodate these requirements and provide them with the best mortgage product for their needs. Here are some key features relating to Harpenden’s self-build products, providing a benchmark for when you are considering future opportunities with your customers.
Self-build – we want to say yes!
PARTNERING WITH A SPECIALIST LENDER
flexible stage releases
Alongside growth in incorporating modern construction methods is the increasing diversity in financing requirements, including a trend toward later-life lending for these projects. As this trend continues, Harpenden, as an experienced selfbuild lender, is seeing repayments come from multiple sources. Income from assets and pensions is common
If you have a self-build application, go to an expert in this sector. By partnering with a specialist lender, customers can save both time and money – and we want to say yes.
SPECIALIST FINANCE INTRODUCER SELF-BUILD
knock-downs, rebuilds and refurbishments considered
One recent application typically illus trates the complex self-build cases we deal with on a regular basis. The main feature of this case was that the appli cant was looking to convert a multi-use three-storey building. The ground floor was an office, with two residential flats above. The objective was to convert this three-storey building into one property.
elf-build properties come in all shapes, sizes, and specs, and as such are becoming an important contributor to the property market. According to the National Custom and Self Build Association, nearly a third of GB adults (32 per cent) are interested in designing and building their own home. The ability to create the perfect property, avoid compromise, and include a long list of bespoke requirements has made self-build an increasingly popular option, and is giving mortgage brokers a strong opportunity for business
Key self-build features:
complex incomes considered
Variousdevelopment.factorsarecreating this self-build interest, including the government’s Right to Buy initiative; working from home providing flexi bility on location; and an increasing desire to create a dream home to the exact specifications of the owner, as many are spending more time living, working, and entertaining at home.
Emily Smith head of intermediary sales & Harpendendistribution,Building Society
no ERCs
WE WANT TO SAY YES
Self-builders also have a blank canvas allowing them the oppor tunity to include, for example, the latest green features in construction, so important to customers today. These factors combined are making self-build an attractive proposition with strong uptake.
Every time we say yes to a mortgage application it’s a great feeling for us as the lender, for the broker, and of course, for the customer. In the case of a selfbuild applications, it’s even more satis fying. We understand what’s at stake for the customer – not only the financial commitment, but also the emotional energy that’s expended when building a very special, personalised dream home.
flexible construction types (valuer-comments dependent)
S
product available direct
FINANCING
In a true sense, you are not looking after equity release clients; you are looking after clients in later life, and that means looking at all their needs, whether equity release or otherwise. Why not take the time to school yourself on meeting the many and varied needs of this demographic? I can guarantee you will broaden not just your horizons, but also your business and income.
Last year, there were over 187k new mortgages completed by over-55 borrowers, and the total lending for the period was a significant £28.1bn. And while lifetime mortgages will be a good part of that lending, accounting for about £5bn, it will not take a maths genius to work out that the bulk of lending could be described as other – notably homeowner purchase and remortgage, and buy-to-let purchase and remortgage.
Essentially, over the past couple of years, many over-55s will have benefited from increased property prices, and for all manner of reasons, they may have the need to use their equity; as well, there is a growing sense that taking mortgage debt into later life is not the perceived no-no of yesteryear. Homes are assets to be used – and as I’ve said many times before, why be a victim of fuel poverty when you’re sat in a property worth hundreds of thousands of pounds?
Expand the later-life lending lens
want to pay off costlier debts, or they want to use it to enjoy their later life.
MI
W
Whether or not you have spent the last couple of weeks getting your kids ready to begin the next year of their academic life, this month feels like we’re embarking on a new beginning, even if it’s just the beginning of the road to the end of 2022.
There are, of course, many other reasons for looking at a home’s equity and what might be done with it, especially in 2022. We have had a significant increase in the cost of living – especially difficult for those on fixed incomes to meet; as well, many people do not have the pension income to satisfy their retirement lives, or they need money to fund long-term care, or they
These are all reasons that are not going away. The younger generation’s demand to buy their own homes is not going to change, but we have limited supply, and high house prices mean high deposit levels. At the same time, we have high rents taking up a big percentage of takehome pay, and wages have not increased by anywhere near the levels we’ve seen house prices go up.
Of course, this part of our market is growing and is likely to continue to do so in the years ahead, but simply looking at the equity-release silo means you are missing out on some significant business that will be suitable for other solutions, whether RIOs or mainstream mortgages – or, indeed, those later in life looking at their property investment portfolios.
So what does that mean for the later-life lending sector? Well, in a sense, the answer is baked into the question. For example, if this market has been simply about equity release options for you as an adviser, then there is no doubting that a broadening of perspective is required – and, if I’m honest, slightly overdue. The ‘new’ is all about later-life lending and not just focusing on equity release.
To help you make that shift, perhaps have a quick look at what the differences between the two actually mean in terms of business levels and, ultimately, access to increasing demand.
Stuart Wilson AirCEO,Group
Now, of course, I will be the first to admit that a lot of water has flown under the bridge since then, and we are in a very different economic situation from last year. However, the fundamentals are not likely to have shifted too much, and these figures should be illuminating for those very reasons and what they represent.
Just recently, UK Finance issued its later-life lending figures for 2021 – that is, the amount of borrowing taken out by the over-55 customer class during the last full calendar year.
The important point for advisers to grasp here is around the acknowledgement of later-life lending in the round, with all the options outlined above, and also around an acceptance that you should be fishing in a much bigger customer pool than that which currently houses only potential equityrelease clients.
hatever happens to you in life, and even if you don’t have kids or they have long since flown the nest, September is always going to feel a little bit like the start of a new school year.
Within the later-life lending market, the seasonal fluctuations that have historically affected the wider residential market might not be there, but I have certainly noticed in recent years just how different the sector can feel between mid-July through August, as people take their summer holidays and/or sit in a six-hour queue at Dover orButFolkestone.summer is over – sort of – and we can perhaps begin to embrace the mortgage market equivalent of new school shoes, itchy uniforms, and the smell of a fresh pencil case equipped with all kinds of things that are either not required or will be broken within days.
Putting the latter to the side, that £28.1bn of lending was up 22 per cent on the year previously, and the anticipation is that although 2021 was a very different year – due to the stamp duty holiday, primarily – the main drivers of this market have not changed. Indeed, you might well argue, that they have become even more ingrained.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com62 SPECIALIST FINANCE INTRODUCER LATER LIFE
So we can see that the main use of funds being released via remortgaging, lifetime mortgages, RIO and the like by the over-55s was to fund home improvement, or to buy second homes, or to help children and grandchildren, especially when it came to funding deposits to help them buy homes.
Thissupport.iswhere
www.mortgageintroducer.com SEPTEMBER 2022 MORTGAGE INTRODUCER 63 SPECIALIST FINANCE INTRODUCER REMORTGAGE
A
As such, we can expect to see remortgage activity ramp up in the coming months as borrowers seek to raise capital to consolidate unsecured debt or simply lock in low rates while they last. This rush to lock in interest rates for remortgage is putting extra demand on the industry to deliver solutions tailored to customers’ needs.
PROACTIVITY IS KEY
As an industry, we must ensure we are able to provide customers with information as quickly as possible. During uncertain times like these, customers do not have the time to wait around for answers, and, as a result, clear communication will be increasingly important.
point isn’t the only thing to bear in mind. Certain lenders may offer a marginally lower rate, but may not allow for individual voluntary arrangements (IVAs) or capital raising for business purposes. As such, brokers must move away from a one-size-fits-all approach and think about the individual needs of their customers.
The remortgage rush: key considerations for brokers
With a plethora of products available, it’s vital for brokers to shop around for their customers. While a certain deal may look the most attractive, ensuring they have read the full terms and conditions is key. During a cost-of-living crisis, brokers should be particularly on the lookout for how they can help bring
down their customers’ upfront costs. For example, certain lenders offer no fees on remortgaging, which could save them as much as £2500, when you add up the cost of arrangement, valuation, and solicitor
As the cost of living continues to increase, we are already seeing a growing number of customers who do not meet the criteria of high-street banks. This could be because they have multiple income sources, or are selfemployed. Rising living costs are also creating a more complicated financial picture for many borrowers, and there is likely to be an increase in the number of customers with impaired credit looking for
Looking ahead, remortgaging activity is only set to grow, and there is a clear opportunity for brokers to support customers in this. As more customers find themselves turned away from high-street lenders, the specialist lending market will play a significant role in supporting people who do not fit the vanilla criteria due to their financial situations – and it’s our job as an industry to educate them on the options available.
However,fees.price
Reece Beddall sales and marketing director, Bluestone Mortgages
THE VALUE OF SPECIALIST LENDERS
MI
s interest rates rise, and the cost-of-living crisis continues to take its toll, the mortgage market is set to see a surge in remortgage activity. The Bank of England recently put interest rates up by 0.5 per cent to 1.75 per cent, the highest rate rise in over 25 years. This, combined with soaring inflation and energy prices, means many consumers are feeling the pinch and are turning to personal loans and credit cards to provide for their families.
specialist lenders have a vital role to play. With their manual approach to underwriting, they will assess customers on a case-by-case basis, providing solutions built on real customers’ needs, not outdated rules and automated processes.
SHOP AROUND
Brokers have a crucial role to play here, in ensuring they are more accessible than ever and are communicating regularly with their customers, to provide them with updates throughout the process. It’s important to stay in touch with clients regularly, rather than just waiting until their current deal is about to finish. Simple steps such as contacting them when market changes could affect them, such as when rates change, will let them know their needs are being looked after.
So what do brokers need to consider when helping customers who are looking to remortgage?
There is, of course, divided opinion on what, as lenders and brokers, we have seen since the start of the costof-living crisis. This follows hot on the heels of the last two-year crisis, which coincided with the change in our European status, and we can only stand back and admire how resilient our industry has been throughout this whole period. We are now entering a new era of higher interest rates, one never experienced by some in our Industry or in the wider community.
t FIBA we recently held our regular broker and lender committee meetings. I always start those meetings with an open discussion of how our market has been and what we can expect in the future. The considerations and the thoughts of those around the table should really be heard over in Westminster; they could perhaps learn a lot from what we know, how we perceive the next 12 months, and what we can do to mitigate some of the turbulence we all expect after this summer and into next year.
After the summer is over
As I said, there is a difference of opinion on not only what we have seen, but also what is coming down the track for all of us over the next 12 months. There are those who have already withdrawn products from the market and those who are seeing reduced enquiry levels. So where
are we with enquiry levels amongst our members? My own experience in deal flow has seen a reduction in numbers, but not drastic; however, my commentary would include a reference to a drop in quality in some sectors. This is across commercial mortgages, buy to let, and bridging enquiries, with the first area being the most difficult to place unless it is truly of the right standard and fits the more stringent of criteria levels.
On a positive note, I can report that the education programme has moved on hugely since last month, and we have now introduced a group of authors to begin writing sample text to see if it will be suitable material for the programme. The syllabus framework is finalised, and the weighting of the subject sections and the proposed assessment criteria are also completed. The current position means that we are now negotiating the final contract details, considering the offers of funding, and working toward a launch date in early 2023. This is a unique moment,
FIBAA
Adam Tyler executive chairman, FIBA Ltd
when everyone is aligned and in support of this proposal, from the smallest broker to the high-street banks, and, it appears, everyone in between. We cannot afford to miss this opportunity, so it is a real focus for the rest of the year, and seems to be dominating my summer months.
MORTGAGE INTRODUCER SEPTEMBER 2022 www.mortgageintroducer.com64 SPECIALIST FINANCE INTRODUCER
There has been genuine engagement throughout the last two years across the property-finance broking community, which has resulted in a really successful period for both brokers and lenders alike involved in the non-mainstream market. As a continuation of the good news, there are more events to come focussing on this area – the Specialist Property Finance Summit in London in October and a real niche event with a couple of our specialist lenders and providers in late September are starting points. Finally, for those keen to work with a wider range of commercial term providers, there are some really great new lender partners on board at FIBA who are looking to work across our membership and that will be announced over the next few weeks. MI
I could write many words here on past experiences of huge interest rates and what caused previous financial crises, but that was in the past. I know we can always use the past as a guide, in some circumstances, on how to deal with current difficulties, but there is no need to revisit these details in this narrative, when we need to look forward.
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