Mortgage Introducer February 2020

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

February 2020

Your home for specialist lending Residential Mortgages

Buy to Let Mortgages

Bridging Finance

Find out why: precisemortgages.co.uk

FOR INTERMEDIARY USE ONLY

Second Charge Loans

£5

RESIDENTIAL MORTGAGES

Reduced rates from your award winning lender We’ve cut rates across our range of residential mortgages, making them even more attractive to customers with specialist lending needs. CCJs, defaults or adverse?

Self-employed with only 1 year’s accounts? We could help:

2 year Fixed rates now from

5 year Fixed rates now from

2.94%

3.19%

Contact your local BDM 0800 116 4385 precisemortgages.co.uk

FOR INTERMEDIARY USE ONLY.

Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549).

Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

01966 (1)

Get in touch

Options with refund of valuation (maximum of £630) and £300 cashback.

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

February 2020

£5

AN EYE ON THE FUTURE Loans Warehouse talks broker technology

 Robert Sinclair  Fleet Interview  The Outlaw

HELP TO BUY

Help to Buy Mortgages for complex cases Being a specialist lender means we’re well placed to support new build customers, even if they’ve been turned down by a high street lender. Our wide range of Help to Buy products and criteria is backed up by our dedicated priority processing team.

£

3.44% 2 year Fixed rates now from 3.44% - reduced by 0.2%

£ Purchase and Remortgage £ for £ and Staircasing available

Help to Buy England, Scotland and Wales

Contact your local BDM 0800 116 4385 precisemortgages.co.uk

FOR INTERMEDIARY USE ONLY.

Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549).

Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

01966 (1)

Get in touch

New build cases assessed within 48 hours and offered within 21 days. Contact the team directly by calling 0330 159 6001.

EDITORIAL

COMMENT

Publishing Director Robyn Hall Robyn@mortgageintroducer.com @RobynHall Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com @RyanFowlerMI

Ryan Fowler RyanFowlerMI

Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com @MI_Nangle

Showing housing a little respect

Deputy News Editor Jake Carter Jake@mortgageintroducer.com @JakeCarter25 Editorial Director Nia Williams Nia@mortgageintroducer.com @mortgagechat

I

Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Tolu Akinnugba Tolu@mortgageintroducer.com Campaign Manager Joanna Cooney joanna@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Printed by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk Mortgage Introducer, CEDAC Media Ltd 23 Austin Friars, London, EC2N 2QP

Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of CEDAC Media Ltd.

t’s fair to say that reshuffles aren’t often the most interesting thing on the political calendar - especially of late. However, this latest one had all the drama of a Netflix premiere.

On the morning of the reshuffle Chancellor Sajid Javid was seen as possibly the safest person in the cabinet. Little did we know that he would tender his resignation before lunchtime in light of alleged requests of increased control over both staffing and the Budget from Number 10.

The fact that we’ve seen the tenth housing minister in 10 years take up a role wouldn’t have shocked many, if anyone, in the industry.

Javid’s exit however was unexpected.

But, despite Javid’s independence, his departure may not be a bad thing for the mortgage, and wider housing, market.

The new “joint economic unit”, which helped facilitate his departure, will operate between Downing Street and the Treasury and will shape the upcoming Budget.

It will also be headed up by a policy specialist in housing called Liam Booth-Smith - hand-picked by

Benedict Cumberbatch, sorry Dominic Cummings.

Booth-Smith previously worked at Localis, a think-tank specialising in housing led by Eddie Lister, who is also a senior adviser to PM Boris Johnson.

Maybe, just maybe, housing will be seen as the economic driver that it is rather than the afterthought that it has been over the past decade.

Now is the time to actually support the market rather than forget that it underpins so many essential sectors of society.

Elsewhere this issue we catch up with Matt Tristram and Sam Busfield of Loans Warehouse to find out how personal loans are supplementing their broker business and can also help you.

We’ve also extended our tech section following popular demand. Our recent readership survey showed us how important it is to you - our readers - so we will be upping our coverage. If there is more you want to see feel free to reach out to me.

Finally we would like to welcome Jake Carter to the team. Jake joins as deputy news editor. We wish him the best of luck in his new role. M I

Your home for specialist lending precisemortgages.co.uk

www.mortgageintroducer.com

Residential Mortgages

Buy to Let Mortgages

Bridging Finance

FEBRUARY 2020

Second Charge Loans

MORTGAGE INTRODUCER

3

MAGAZINE

WHAT’S INSIDE

Contents 7 AMI Review 8 Market Review 10 Marketing Review 12 Housing Review 16 London Review 18 Buy-to-let Review 26 Interview: Fleet Mortgages 29 Technology Review 34 Product Review 36 GI Review 39 Equity Release Review 42 Conveyancing Review 44 Education Review 46 The Outlaw Time for some goodbyes

29

TECHNOLOGY

50

48 The Bigger Issue Will the First Home scheme help generation rent?

50 Cover: The future of loans Jessica Nangle catches up with Loans Warehouse to find out about their push into personal loans

INTERVIEW: LOANS WAREHOUSE

54 Loan Introducer The latest from the second charge market 60 Interview: Bradley Moore Jessica Nangle spoke to Brightstar’s Bradley Moore to find out what’s new at the firm 62 Specialist Finance Introducer The latest updates from the specialist finance sector 76 The Hall of Fame Runners in the storm

46 18

BUY-TO-LET

THE OUTLAW

21

THURSDAY 5 MARCH 2020 PRESTONFIELD HOUSE, EDINBURGH www.scottishmortgageawards.com

www.mortgageintroducer.com

FEBRUARY 2020

MORTGAGE INTRODUCER

5

REVIEW

AMI

The dangerous devil in the detail Robert Sinclair chief executive officer, AMI

T

he long-awaited Policy Statement on Mortgage Advice and Selling Standards has now been published by the FCA. Whilst the policy changes came into effect from 31 January there are transitional provisions that run to 30 July 2020 which allows firms to defer application.

The FCA have stated that they are implementing all their consultation proposals with only very minor amendments, implicitly ignoring the objections raised by AMI. The press headlines were limited as this was a very soft launch with only a Twitter message announcing its arrival on the day and therefore most articles appeared the next week. Indeed, it took days for the FCA to add the policy statement to their home page.

All of the trade press to date has been focussed on the easing of executiononly channels, relaxing of the “advice triggers”, permitting lower pricing on execution-only and a new requirement on brokers to document when they do not recommend the cheapest suitable mortgage.

DIFFERENT PERSPECTIVE

Whilst the headlines feel very negative from an intermediary perspective, the actual rules make very different and interesting reading. Our review of the changes by looking at the detailed text changes delivers a different perspective.

We consider that the new MCOB rules and particularly the Perimeter Guidance mean that whilst online information can be developed, it sets clear boundaries for the Price Comparison Websites providing limits on how far they can go without straying into advice.

Where they make factual comparisons they may stay outside, www.mortgageintroducer.com

but asking too many questions, personalising listings, combining criteria or steering towards a provider or product will mean they are advising.

For those hoping to use technology to deliver execution-only, the interaction rule has been extended from the implied simpler verbal definition to embrace all electronic medium.

Changes to what may constitute a contract variation means that product transfers must be total “like for like” changes in order not to require advice.

Reality strikes home with the words, “Broadly, if an interaction results in the customer receiving personalised information it is likely to trigger the need to give advice. A consumer receiving personalised information may incorrectly believe they had been advised, and therefore we do not agree that we should remove this interaction trigger.”

When followed by: “Giving the monthly cost of a mortgage or saying whether a customer is eligible for a particular mortgage involves personalised rather than generic information… the distinction… helps firms judge whether an interaction triggers the need for advice.”

My concern was always that the reduced affordability assessments combined with differential pricing and on-line developments might open up remortgaging as well as liberating product transfers. Any regulated firm looking at these rules with an emphasis on a duty of care, acting in their customers’ interests and protecting the consumer from making poor choices is less likely to expand their executiononly approach.

There is an awful lot in the combined detail of the new rules and more particularly the expanded guidance.

It is in the depths of the Perimeter Guidance that the real changes are “buried”.

Many thought the purpose was to help the new fintechs break into the mortgage market more easily yet the complexity of the thousands of words defining interaction, advice and the

“triggers” do little to simplify.

It does provide more real and practical examples to assist in ensuring compliance with the rules. It will be interesting how firms interpret the new rules and guidance, looking past the rhetoric of the policy statement.

It does require a long and detailed review of the MCOB and Perimeter Guidance with a balanced mind.

THE POLITICS OF INVESTING

Having spent 2016 and 2017 working on the last fundamental review of the Financial Services Compensation Scheme, it is fascinating to see investment advisers lobbying their MPs in droves as to its unfairness. I am not sure where they were during that review, other than Ken Davy of SimplyBiz who was very vocal in advocating a product levy.

The withdrawal of mortgage brokers writing protection business from the pensions class has increased the amount investment advisers pay, but this was deemed a fair change. I remain concerned that the investment community has not purged itself of its less able practitioners and whilst adviser charging was meant to remove conflicts of interest, the British Steel and unregulated investments debacles have left it exposed.

In addition, The Times assaults on SJP and Chase de Vere have done nothing to add to the image of the industry or sector. There appears limited appetite to call out bad and high-risk products and poor advice, with the professional bodies waiting for the FCA to act rather than taking a lead.

The failure of the FCA to prevent now gives a £635m compensation bill which dwarves their own costs.

AMI remains interested in a product levy as a means of changing the funding approach, but having been involved in the last three major reviews of FSCS, Treasury has had little appetite.

The FCA needs to get a grip on a sector which RDR was meant to professionalise, but still seems to have fundamental issues. M I

FEBRUARY 2020 MORTGAGE INTRODUCER

7

REVIEW

MARKET

Looking at the opportunities Craig Calder director of mortgages, Barclays

I

n last month’s article I focussed on a selection of points from UK Finance’s, ‘The Changing Shape of the Mortgage Market’ report. This month I’d like to start with another trade body report - The new ‘normal’ – prospects for 2019 and 2020: A decade after the financial crisis, how sustainable is the UK mortgage recovery?

The new ‘normal’ report from the Intermediary Mortgage Lenders Association (IMLA) outlines that the next two years certainly look positive for the mortgage market. It underlines how resilient it has remained in the face of ongoing political uncertainty, and that a boost in consumer confidence is likely to support modest growth over the next two years.

Digging down into a little more detail, the report shows that gross mortgage lending fell by between 1% and 2% in 2019. Despite this decline, it predicts that gross mortgage lending will grow by 1.4% to £268bn in 2020, and will reach £275bn in 2021. These increases are predicted to be largely driven by lending for house purchases.

IMLA’s report also suggests that market growth will be supported by earnings growth and the low rate environment, which has provided mortgage holders with a £32bn windfall in reduced interest payments relative to a decade ago. Political stability following the General Election is cited as further encouragement for some consumers to return to the market.

The report also highlights a number of key challenges expected for the mortgage market over the coming years.

The growth predicted will partly rely on Britain’s ability to negotiate a trade deal with the EU,

8

Remortgaging is expected to remain flat over the next two years at £100bn as more borrowers turn to product transfers, Higher volumes of 5-year fixed rate mortgages are also responsible for the stagnant figures, Product transfer volumes grew by 13.3% between Q1 2018, and Q3 2019 and the report forecasts that this area of the market will grow again by 4% in 2020 to £172bn and a further 2% in 2021 to £176bn, The buy-to-let market will continue to fall to £40bn in 2020 and £39bn in 2021 as tax relief for landlords is removed in April this year Another key take-out from this report was that IMLA expects intermediaries to grow their market share to 77% of all mortgage transactions in 2020.

This represent yet another positive market shift, and the importance attached to the intermediary market – as well as consumer accessibility to a more holistic advice process - is something I’d like to focus on further.

HOLISTIC ADVICE PROCESS

Research from Openwork found that a third (33%) of adults were uncertain about where to access financial advice, with women (35%) more uncertain than men (30%). The younger generation were said to struggle most when it came to sourcing financial support, with over half (51%) of 18-24 year olds not knowing where to seek this form of advice.

The research also found that despite a growing shift towards the increased use of technology, the majority of adults (75%) would prefer face-to-face advice. Over two thirds (67%) agreed robo-advice would not be appropriate for their specific needs, with both 18-24 year olds (71%) and those aged 55-64 (73%) saying they were unsure about the benefits attached to this type of advice.

It’s interesting to note that the younger generation still place such value in a face-to-face advice process

MORTGAGE INTRODUCER FEBRUARY 2020

even though they are now surrounded by a plethora of ways to communicate, gather information and build their knowledge base.

As reflected in the IMLA data, there is growing demand for expert financial advice but it’s worrying that so many people are struggling to locate the right kind of advice.

This suggests that some intermediary firms may need to take a look at their discoverability and to market themselves in a way which will appeal to a younger generation who may be looking for a broader range of financial advice.

It remains difficult to be a specialist in all areas but, in the new ‘normal’, intermediaries need to find ways to broaden their holistic approach and implement referral links with trusted partners in other advice-driven areas to better support their clients financial planning needs.

It’s this level of service which will help generate more business and widen ancillary revenue streams. However, it’s not only intermediary firms who need to ensure that service standards are on point in 2020, lenders also need to step up to the plate.

SERVICE DEMANDS

According to NACFB’s latest broker survey, brokers value service as much as rate. An NACFB broker’s most common reason for selecting a lender in 2019 was that they offered the lowest rate for their client (37%). However, other key factors revolved around service. They included - certainty of funding (18%) and previous positive experiences (16%).

When looking at how business was being generated, the majority of NACFB brokers received their business from direct enquiries (45%) in 2019.

This is an interesting breakdown as it shows just some of the lead generation opportunities available to mortgage advisers and how important it is to understand exactly what clients want and how to best service their everchanging needs. M I www.mortgageintroducer.com

Looking for flexibility for your portfolio landlord?

Solution Found.

Our mission is to help you find the right portfolio landlord solution. With no limit on the background portfolio size and no need for business plans we make things simple.

So, for portfolio landlords who need flexibility, turn to Foundation, and it’s Solution Found.

Call us today on

0344 770 8032

©2019 Foundation Home Loans is a trading style of Paratus AMC Limited. Registered Office: No.5 Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA. Registered in England with Company No. 03489004. Paratus AMC Limited is authorised and regulated by the Financial Conduct Authority. Our registration number is 301128. Buy to let mortgages are not regulated by the Financial Conduct Authority. No limit on portfolio size, subject to maximum borrowing of £3 million with Foundation Home Loans. Calls may be monitored and recorded.

foundationforintermediaries.co.uk

For intermediaries only

REVIEW

MARKETING

The importance of rentals Paul Hunt Paul Hunt Marketing

O

ne of my last major projects in 2017 at my last employer, was to lead the marketing launch of the biggest Build to Rent (BTR) developments in the North West that year, 324 units in the Baltic Triangle, called the Cargo Building.

Before this, I’d heard of BTR, but not grasped how institutional investment made the concept so different to traditional private sector rentals and how the lifestyle element of such developments can really capture a need and imagination of potential residents (they aren’t called tenants in the BTR world).

RENTED ACCOMMODATION

Its been commented recently that as many as nearly four in 10 British adults expect that either they and/ or their children will be living in rented accommodation in ten years’ time. Already, nearly 30% of the UK population lives in private rented accommodation.

By 2025, this figure is projected to overtake owner-occupiers for the first time and a recent poll by Deltapoll found that nearly four in ten British adults expect that either they and/or their children will be living in rented accommodation in 10 years’ time.

Because of this, there has been calls by many senior figures in the property sector for the Prime Minister to appoint a Minister for Renting.

Since my involvement in the BTR sector, I’ve kept watch on the market and so this month, I’ve looked at two recent stories published by Savills and Home Made that look at the rental and BTR sectors.

The Savills story was focussed

10

MORTGAGE INTRODUCER

around analysis by Savills for industry trade body the British Property Federation (BPF), which found that the number of BTR homes has increased, with 150,000 BTR homes in planning, under construction or completed.

There has also been a 51% surge in the number of completed US-style rental homes in key regional cities, with Manchester, Birmingham Liverpool, Leeds, Glasgow and Sheffield leading the way.

Without repeating the whole story, the stats represent an increase of 15% over last year.

Manchester and Salford lead the way whilst Birmingham meanwhile nearly doubled its pipeline with Leeds, Liverpool, Glasgow and Sheffield all seeing an increase in BTR activity too.

Interestingly Liverpool doesn’t feature in the story, and I know we were already worried back in 2017 that the city was at saturation point and so I suspect that’s part if the reason growth on BTR doesn’t compare with the other cities mentioned.

The next story from Home Made

looks at the issue that as landlords leave the sector, rents will undoubtedly rise and they forecast a rise of between 3% to 5%.

LOW RATES

They suggest that landlords look to take advantage of the potential upcoming drop in mortgage rates for future investments. This is great news for mortgage brokers potentially and the advent of such tools like Lendlord, for example, can only assist in helping landlords and brokers ensure their portfolio is on the lowest mortgage rates.

They also state that they expect to see gross yields increasing, but operating profit margins going down and say that in this climate landlords need to control their costs and make sure they’re not paying through the nose for agency fees.

This month, the news from Savills slightly edges it and I hope that we are on a cusp of increased activity in BTR to provide more choice to the significant proportion of the population who decide, choose or have to rent. M I

ONE-ON-ONE

V

S AV IL L S

NE W SW OR TH

IN ES S

NE FI T CU ST OM ER BE BR OK ER S SU PP OR TI NG IN NO VATI ON R FA CT OR GA M E CH AN GE

FEBRUARY 2020

HOME MADE

8

N EW SW O RT

6

CU ST O M ER BE N EF IT

5

SU PP O RT IN G

4

IN N O VATI O N

4

GA M E CH AN GE R FA CT O R

H IN ES S

BR O KE RS

5 4 6 4 4M I

www.mortgageintroducer.com

REVIEW

HOUSING

Housing returns to the political agenda Stuart Miller customer director, Newcastle Building Society

T

he Budget is set for 11 March, and we are all waiting to see just how radical Rishi Sunak is going to be.

Boris Johnson and his right hand man Dominic Cummings have both been very vocal about shaking things up, demolishing long-accepted norms in how the civil service is run and introducing big, meaningful change.

What that all means in practice is still rather less clear, but Mr Sunak’s first budget is likely to give us the first round of action.

We’ve already had some indication of what’s in store for the housing market, with both the Conservative manifesto and Queen’s speech suggesting that there will be support confirmed, particularly for first-time buyers.

In January, the government used the Queen’s speech to announce plans to make owning a home more affordable.

This includes the new First Home scheme making homes available at a discount for local first-time buyers.

AFFORDABLE HOUSES

According to the government, councils will be able to ‘use housing developers’ contributions to discount homes by 30% for people who cannot otherwise afford to buy in their area’. The Affordable Homes Programme will also be renewed, building more homes for rent and delivering a new shared ownership offer.

The details of these schemes are going to be fundamental to whether or not they deliver real access to homeownership for would-be first-time buyers. We are hugely supportive of any measure to support those wishing

12

to get on the housing ladder, but we are also mindful of schemes that have been announced with fanfare in the past and then failed to take off. Discounting homes presents some tricky issues for lenders and those buying them. How do you accurately value a property bought for less than market value? How do you calculate the loan-to-value on the mortgage needed? What happens to the resale value if and when the homeowner wants to sell?

Who benefits from that discount on resale? What incentive is there going to be for developers to build homes for discount at scale? What effect will this have on prices in surrounding areas?

We need to see the answers to these questions sooner rather than later if we are to deliver on the promise of these schemes – homes take years to build.

There is also the possibility of extending the Help to Buy scheme beyond 2023, when a scaled back version with regional price caps is currently due to end. Help to Buy has been criticised for inflating values and filling developers’ pockets but it has also supported lenders offering higher loan-to-value mortgages.

Before the scheme came in there was a real block on lenders prepared to scale LTVs up to 95% – a level that is now needed by many first-time buyers, particularly in London and the South East where property values are so high and incomes have simply not kept pace.

First-time buyers are always the popular vote-winner for politicians looking to do something for the housing market, but there is also a real need to focus further up the ladder.

Now is an opportune moment to do something meaningful, precisely because this government does not need to win any votes for the next five years.

While mortgage rates are at record lows and wage growth outpaces inflation, it might seem like the housing market is in reasonable health.

MORTGAGE INTRODUCER FEBRUARY 2020

In many ways, it is. Prices are still rising, though by a far more sustainable rate of between 1 and 2 per cent annually. However, there are some really big structural challenges in the market: stamp duty has become a massive block on all moves after the first.

AFFORDABLE HOUSES

It is choking the purchase market, pushing up house prices and exacerbating the problem of single person households remaining in housing stock that has five bedrooms.

The price of moving is prohibitive – it makes no sense. While in some ways, reducing stamp duty for older homeowners who are ‘already rich’ will be seen as deeply unpopular with younger and poorer voters, doing it will nevertheless have a positive effect on the whole housing chain, which in turn will make it easier for those same people to get a foot on the ladder. If there was a time to be brave about this, now is it. M I

Government pledges  Better deal for renters with new lifetime deposit – making the process of moving home easier and cheaper for millions  Confirmation of plans to abolish ‘no-fault’ evictions – preventing landlords from evicting tenants at short notice and without good reason  Plans to slash the cost of new homes for local people and key workers in their area by up to a third  New English devolution white paper to unleash potential of all regions across the country – levelling up every city, town and county  Biggest change to building safety laws for 40 years to deliver new safety framework for high-rise buildings – ensuring residents’ concerns never go ignored  A revolutionary new deal for renters will restore fairness, honesty and transparency to the heart of the housing market, thanks to new proposals unveiled as part of the Queen’s Speech.

www.mortgageintroducer.com

w

Refer your B&C and win a car NEW FOR 2020

2 x Brand New C1 Citroen Cars to be won by S&S Brokers To enter: submit 5 sales to be in the draw which will take place at 5pm on Tuesday 30th June 2020 (and a 2nd draw Friday 18th Dec 2020)

WIN

ME

WIN

THIS

“Exclusive” to Safe&Secure Introducers, DA’s, Mortgage Intelligence, Mortgage Next & Life&Easy Network.

The more policies you introduce the more chance you have to win the cars.

“award winning customer advice” www.safeandsecure.co.uk tel: 01332 200888

Streets ahead in buy-to-let Free valuation for standard properties valued up to £400k • 3.39% to 75% LTV • £300k max loan size • ICR calculation @ 3.39%

Call our team on 020 7096 2700 Landbay.co.uk

013_LB_Mortgage Introducer_Full_page_Ad_FINAL.indd 1

05/02/2020 12:20

REVIEW

LONDON

London ready, steady and go for recovery Robin Johnson managing director, Kinleigh, Folkard and Hayward Professional Services

L

ondon’s property market is often referred to as different from the rest of the UK, something which has been a dominant theme over the past 12 months as price growth in the capital stalled while values further north continued to climb.

But it is a mistake to consider London as one homogenous market – it is multiple much smaller markets, with location key to performance on price.

Property types are also critical when it comes to thinking about trends in pricing and demand.

What happens to activity in the super prime end of the market, driven by demand from the international super rich, bears little relation to what is going on in the two-bed flat market in London’s zone three.

While the city has had a tough time in the past year, December’s general election result has finally provided a clear majority in the House of Commons and, with that, at least more certainty about the direction of travel on Brexit than we had previously.

Property commentators across the board have tipped a ‘Boris bounce’ in the coming year, with many arguing that pent-up demand from homeowners looking to move will release, bringing more stock to the market and therefore more choice to prospective buyers.

Mortgage rates started the year just as competitive as they were at the close of 2019, suggesting that the financial impetus to buy rather than rent (for those who can afford it) looks healthy.

In the immediate aftermath of the election result, some argued that the www.mortgageintroducer.com 12:20

material impact of a so-called Boris bounce would have a minimal effect on prices.

Research house Capital Economics noted at the start of the year that downward price pressures in London have eased, driven by a slump in homes coming up for sale. But, their economists argued, with house prices high and mortgage interest rates close to their floor that is unlikely to drive a recovery in prices soon.

They said: ‘Rather, we expect a 1% fall in house prices during 2020, and flat prices in 2021. That said, the outlook for rents is stronger. We think the growing imbalance between rental demand and supply in London will push rents up by a further 8% or so by 2021.’

HOUSE PRICE INFLATION

This is rather a pessimistic view for the purchase market (though good for letting agents and landlords) and bucks the broader trend. Most are forecasting a consensus rise in house price inflation across the UK of between 1% and 2% by the end of 2020.

Savills is predicting a 1% bump while EY Item Club, Rightmove and RICS consider there will be 2% growth by the end of the year. Halifax is forecasting inflation between 1% and 3%, while Yorkshire Building Society is betting on growth between 0% and 2%.

None of these predictions are wild by any stretch of the imagination, yet steady and positive growth in property values is to be welcomed – particularly as the UK is not yet out of the woods on Brexit negotiations.

This belies what is likely to happen in regional markets however, and also, within London itself. The bounce effect on house prices as a result of the strong Conservative majority is likely to have a much bigger effect in London than in other parts of the country.

International buyers will be heartened by the stability Boris Johnson’s government claims it will deliver.

Regardless of the UK’s withdrawal from the European Union, there are investors seeking super prime assets in the capital whose money is coming from all around the world, from states and continents for which Brexit is essentially irrelevant.

Reinstating international confidence in the London property market at this level has knock-on effects for the rest of the city. We are already seeing signs of it: house builder Berkeley Homes has just acquired a £120m site in Camden, North London with planning permission for about 450 homes and additional office space.

The company’s founder, Tony Pidgley, is clearly of the view that the London market is set to pick up after three years of sitting on its hands.

I think it’s also important to remember that, even with activity subdued and prices relatively stagnant, the figures from the property market are really not that bad. According to Nationwide Building Society, house price inflation was up by 1.4% annually last month despite December typically being one of the slowest in the property market.

Separate figures from the Office for National Statistics and HM Land Registry found prices in London fell 1.6% over the course of 2019, and 0.3% in the South East.

However, we think that the tide is turning on this – January has already seen a strong uptick in the number of new buyers and sellers registering with agents while data from the London Central Portfolio index suggested the Greater London market showed a modest uptick in November, with monthly prices increasing 0.6 per cent to £616,584, bringing annual growth to 1.7%. Average prices for new build have also seen a rally with a 1.2% increase in November.

We are quietly optimistic about London’s property market prospects.

Providing this government delivers the decisiveness it has promised, confidence is likely to rebound – something that typically bodes well for the housing market. M I

FEBRUARY 2020 MORTGAGE INTRODUCER

15

The most flexible income criteria of any specialist mortgage lender. (We checked*.)

For Professional Intermediary Use Only. *Comparison of published income criteria for residential mortgages from 9 specialist lenders, conducted by Together, November 2019.

REVIEW

HIGH NET WORTH

A little certainty Peter Izard business development manager, Investec Private Bank

I

Investec forecasts full year GDP growth to be 1.2% in 2020 and expects the Bank of England to keep interest rates steady at 0.75% throughout the year, with a potential hike to 1% in mid-2021.

Set against this backdrop, what can we expect for the property market?

In terms of prices, we are unlikely to see any spectacular growth in the next 12 months. Savills forecasts national house prices to increase by 1% in 2020 and price rises of 3% in Prime Central London. However, even while we experience a transition period, the more

16

MORTGAGE INTRODUCER

certain environment should provide a boost to transaction levels.

At Investec Private Bank, we have already seen a rise in Prime London purchase business as buyers return to the market seeking value and the period at the beginning of the year was one of the busiest I have known.

There is also continued demand for remortgages and we have experienced high demand for our high net worth remortgages.

One hurdle that could stand in the way of increased transactions is vendor expectations. All of the talk of a ‘Boris Boom’ and a ‘Brexit Bounce’ may be rhetoric, but it could also encourage vendors to demand unrealistic prices.

This dynamic has been a sticking point in the market before and there is a danger that the positive mood in the market could further exacerbate the

FEBRUARY 2020

gap between vendor and buyer.

One event that could also have a significant impact is the Budget. On the back of Brexit there will be a lot of emphasis on this Budget laying strong foundations that maintain the UK’s position as a global centre and encourage international investment.

Property, particularly in London, continues to be a prized asset amongst global investors and so I would like to see a review of the current stamp duty system to capitalise on this opportunity.

Whether or not the Budget provides such major reforms is yet to be seen, but there is reason to expect that it will be a positive Budget for the markets, with announcements on investment and a conciliatory approach to taxation. Not only will it be the first Budget of the decade and of this new government, it will also be the first post-Brexit Budget and there will be a huge amount of pressure on the Chancellor to show that the country is in a strong economic position. M I www.mortgageintroducer.com

REVIEW

ADVICE

We’ve been let down Rory Joseph director and

Xxxxxxxxxx Sebastian Murphy

xxxxxxxxxxxxxxxx, head of mortgage finance, xxxxxxxxxxxxxxxx JLM Mortgage Servixes

M

any predicted the FCA would come out with its post-Mortgages Market Study rules in the days leading up to Christmas. When that didn’t happen, we naturally assumed the Policy Statement might not be as bad as first anticipated.

We were wrong. It’s much worse than we might have believed, plus when you release it on the last day of the month, an hour or so before most people clock off for the weekend you can probably tell what the FCA think of its contents. Or at least what they

anticipate our industry will think of its contents It is so full of mixed messages and inconsistent feedback, that there’s no wonder it has gone down this particular course. Unfortunately, that makes everything 100 times more damaging – in essence, this statement and its protestations of supposed ‘industry support’ for the measures shows that the regulator clearly doesn’t have consumers’ best interests at heart.

It’s hard to know where to start with this Policy Statement – and we do not have the time or space here to go into every single contradiction or attack on the provision of advice and those who deliver it.

In December last year, less than two months before the publication of this Policy Statement, the FCA itself said that a customer opting for execution-

So we can help people like Jenny.

She runs her own business – but also owns a couple of rental properties, and regularly receives dividends from share investments too. All of which we can take into account. togethermoney.com/residential For Professional Intermediary Use Only.

only was at a far greater risk than those opting for advice.

It said that execution-only was ‘inherently riskier’ than advised sales. In a month and a half, it has now apparently changed its mind – execution-only is NOT inherently riskier than advised sales it says, even though its research clearly shows a result that says otherwise.

What did it do in December last year? Mis-speak? Make no bones about it - this is all about disincentivising advised sales, taking away triggers for advice which provide consumers with a far better chance of securing the right outcome for their needs and circumstances. The FCA has bought, hook, line and sinker the message from sellers of execution-only or the larger aggregators who want to come into this market, that they ‘deserve’ a risk-free environment in order to peddle products that consumers don’t understand with no care for advice or the final outcome. M I

REVIEW

BUY-TO-LET

Future lies with choice and opportunity Paul Adams sales director, Pepper Money

F

ew areas of the mortgage market attract quite as much commentary as buy-to-let, possibly because of the sheer volume or regulatory and taxation changes that have been placed upon the sector in recent years.

It is clear, however, that while there are now more considerations for people to think about when investing in rental property, these still pale into relative insignificance when set against the fundamentals behind an investment in buy-to-let.

The primary factor behind the strength of buy-to-let is the growth of the Private Rented Sector and the ongoing demand for rental property.

The Private Rented Sector now accounts for around 20% of all households in the UK, with an increase of 2.5 million rental homes since 2000, according to a report by Seven Capital.

Consequently, privately rented property sits comfortably as the second biggest tenure in the UK housing market and looks set to rise thanks to a combination of more young people choosing rented accommodation over home ownership and growth amongst older tenants.

Seven Capital says a record 1.13 million-over 50s are now renting from landlords, which is up from just 651,000 a decade ago. It adds that, by 2021, one in four people will be looking to rent and, over the next four years, the number of households in privately rented accommodation is expected to grow to 5.79 million.

To help them meet this demand from tenants, landlords have access to a growing number of product options.

18

According to the latest buy-to-let Mortgage Index from Mortgages for Business, in Q3 2019 there were 49 lenders active in the buy-to-let market, offering more than 1,900 products – an increase of around 10% on the previous quarter.These growing options also take account of how landlords want to structure their investment for tax purposes.

TAX MATTERS

Following changes to the treatment of mortgage interest tax relief and the surcharge on Stamp Duty, tax is now a much bigger consideration for all landlords and a key part of the advice process should be to recommend that your clients speak to a specialist property tax expert.

If you do not already have a working relationship or a referral arrangement with a tax expert, this is something that could be beneficial for your business and your clients.

One way that many landlords have chosen to manage their tax liability is by holding their investment in a limited company and this is another area where the mortgage options are growing.

Mortgages for Business says there were 31 lenders offering limited company buy-to-let in Q3 2019 and we know that this number has since increased to at least 32, as Pepper Money recently launched into the limited company buy-to-let market, taking our flexible and hands-on approach to underwriting to this sector.

ALL CIRCUMSTANCES

The variety of mortgages available to buy-to-let landlords also mean that there are options for landlords with a different range of circumstances from first-time buyers to portfolio landlords, through to investors who have recent experience of adverse credit.

Pepper Money recently conducted some research amongst more

MORTGAGE INTRODUCER FEBRUARY 2020

than 4,000 adults in conjunction with YouGov. The research found that 15% of respondents, or 7.86m people, based on current population estimates, have experienced credit problems, including missed payments, CCJs, defaults, unsecured arrears and secured arrears, in the last three years.

Of these, 5% of people are thinking about purchasing a buy-to-let property to rent out in the next 12 months. This means there could potentially be nearly 400,000 landlords with recent credit problems who are looking for a buy-tolet mortgage.

“As long as the market is built on strong foundations of tenant demand, there will be an appetite from landlords who see the sector as a longterm investment” You might find this statistic surprising, but there are so many ways for people to slip up on their credit, particularly if they are landlords with multiple linked addresses. So, it is not unreasonable that many landlords might be looking to invest even if they don’t have a completely clean credit record.

DIVERSE RANGE

The diverse range of buy-to-let mortgages available means that there are plenty of options available for these landlords, whether they are looking to buy in their own name or choose to hold their investment in a limited company.

The future of buy-to-let will always attract speculation, but as long as the market is built on strong foundations of tenant demand, there will be an appetite from landlords who see the sector as a long-term investment.

The competitive nature of the mortgage market will ensure that there are plenty of lending options to meet the needs of these landlords, and so it looks as though the future of buy-tolet will continue to offer choice and opportunity. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

HMOs can offer opportunities Kevin Webb managing director, Legal & General Surveying Services

T

his decade looks set to be one of consolidation in the private rented sector: professional landlords continue to rebalance their portfolios, selling out of lower yielding properties and areas and reinvesting, either in better yielding properties or into their existing portfolios to depress loan-to-values, thereby managing costs.

The financial crisis, depressed house price growth and the demise of many lenders that had fuelled the buy-to-let lending boom in the early 2000s by 2009 led to a severe contraction in lending to private landlords.

Fiscal changes brought in at the behest of George Osborne during his tenure as Chancellor of the Exchequer combined with a prudential clampdown on lending standards served to keep a lid on the market throughout the second half of the 2010s, pushing out a large number of remaining amateur and smaller-time landlords making just enough yield to get by.

MAXIMISING YIELD

Managing costs has been evident for some years now and it’s been fairly well accepted that there are some tried and tested ways to maximise yield, both on existing properties and new investments.

One trend has seen landlords extract money from London and the South East, redeploying capital into regional cities where capital values are lower and rents are proportionally higher.

This has driven investment further out of the South East, to places such as Leeds, Nottingham, Birmingham, www.mortgageintroducer.com

Firstly, an HMO filled with young professionals in zone three in London or the centre of Liverpool is a completely different prospect from an HMO in Dover. How much tenant risk assessment is being carried out by lenders keen to chase margin?

Liverpool, Manchester and Glasgow all seeing a rise in demand for quality rental stock from both landlords and tenants.

The other tactic has been to invest in properties that justify higher rents and therefore better yields. Houses in Multiple Occupation are the flavour of the 2020s in my view, along with a rise in the number of landlords turning small-time developers using bridging at the outset to improve stock and add capital value.

GROWING SECTOR

The rise in popularity of HMOs though is, I think, one we as an industry need to be mindful of. Just this week I read a blog from one well-known industry broker detailing how one of their advisers had secured a seventh buyto-let mortgage for a couple looking to expand their existing portfolio of six HMOs which had a blended LTV of 85%.

Landlord shows and online platforms are chock-a-block with HMO stands.

Clearly, there is as much motivation for lenders and brokers to get behind landlords looking to maintain or improve their profitability by investing in HMOs as there is for landlords themselves. In a market where the pressure to write vanilla business has blasted all but the very biggest providers out of competitive pricing, the question on everyone’s lips is – where next?

HMOs managed well and responsibly can offer a great opportunity for landlords and lenders.

Multiple tenancy agreements offer better void cover and mitigate income risk for lenders. However, they also present their own set of challenges, and I don’t believe that all lenders considering playing in this market have fully thought through the potential property risks posed by HMOs over straight buy-to-lets.

TENANT TURNOVER

Tenant risk is a real issue. Tenants are not ‘of a type’. Young professionals or people working away from family homes are a different prospect to more itinerant or impoverished tenants.

Turnover of tenants is always higher in HMOs, leading to higher maintenance costs, more property damage and greater risk to capital value.

There is a complex web of licensing requirements, which landlords barely understand and local authorities cannot police, fire safety regulations and regulatory requirements that have to be checked, but by whom and where the consequences for failing these are rather vague.

Policy risk is also an issue. As the market expands so too does the level of scrutiny and the expectations that a market should not disadvantage or exploit vulnerable groups. Landlords who want to convert family homes in Birmingham into small HMOs will need to submit planning applications to do so under new plans revealed by the city council last month.

COMPLEX CONCERNS

The local authority plans to introduce a city-wide Article 4 Directive, removing ‘permitted development rights’ for small HMOs, so that planning permission must be obtained before development can take place.

The council says high concentrations of HMOs ‘can have a negative impact on the character of neighbourhoods, residential amenity and create unbalanced communities’. The directive will come in to force on 8 June 2020.

My prediction for the buy-to-let market in the coming years is a move towards HMOs, which do offer some great potential. However, lenders must be sure of what they’re lending on when it comes to complex. It’s called complex for a reason. M I

FEBRUARY 2020 MORTGAGE INTRODUCER

19

REVIEW

BUY-TO-LET

Buy-to-let? More of the same, please Jeff Knight director of marketing, Foundation Home Loans

I

n most walks of life, a request to deliver ‘more of the same, please’ would be seen as a positive. A general happiness with what’s happened previously, and an understanding that were the same to happen again, that would be a generally positive experience.

However, what about the mortgage market and, specifically, the buy-tolet sector? Would any stakeholders be happy with ‘more of the same’, or - in our quest to secure more business, more customers, more profit - would a 12-month period which looked and felt like the previous one, actually be viewed as something of a step back?

Of course, it depends on the circumstances. For example, the mortgage market has performed pretty steadily over the past half a decade – a plateauing of business might have been expected and accepted more recently, because of the rather unique political situation we find ourselves in, and the uncertainty about how the UK economy and the housing market specifically might react to all things Brexit. But, what about buy-to-let?

This is a slightly different case in my opinion, because we appear to have gone from a point mid-way through the last decade, when we were on a strong upward trajectory, to a slightly different place now.

The reasons behind this are many but clearly buy-to-let – and landlords in particular – have taken a number of hits, both from a regulatory point of view, but also taxation wise (both stamp duty and mortgage interest tax relief), and various other impacts, which have all had a unique effect on

20

activity, profitability and have seen some landlords leaving the sector In that sense, do we want ‘more of the same’ when it comes to intervention? I very much doubt it.

If you’re a landlord, you’re probably only now getting used to the impact of taxation changes on your profitability.

You’re only now getting used to the idea of the abolition of Section 21 ‘no-fault evictions’. You’re only now getting used to the 3% extra charge on stamp duty. You’re only now getting used to an environment where the political impetus appears to have been to support first-time buyers possibly at your expense.

GROSS LENDING

That has taken a lot of getting used to, and therefore ‘more of the same, please’ might not truly cut it. In certain aspects however, we might all have to accept a certain level of ‘more of the same’ – as lenders, the overall gross lending pie has been the same size for a couple of years now, with the anticipation that it will not change drastically over the same period going forward.

IMLA recently released a report which predicted 2019 buy-to-let gross lending would be similar to 2018’s £37bn, and that it would drop in 2020, with potentially an uptick in 2021.

It predicates this analysis on an assumption that remortgage activity will fall, mainly because of the growing popularity of 5-year deals during the last couple of years – as a means to maximise borrowing – and therefore those cases that would normally have come around every two years, will now take longer to return. Not forgetting, product transfer activity which has also grown, although perhaps nowhere near the growth we have seen in the residential sector.

But, our view, is that there could be a greater cause for positivity in our sector than some might imagine. We,

MORTGAGE INTRODUCER FEBRUARY 2020

for example, await March’s Budget but there’s no doubting we probably have greater certainty for landlords with a Conservative government than what might have been brought in by Labour.

Will it roll-back on the stamp duty/ taxation changes? It’s doubtful, but there’s also less chance of big-ticket, PRS/BTL-hurting measures being introduced now. In that sense, more of the same is likely to be better.

Plus, there is the fortitude and ambitions of landlord clients. We’ve seen a change and move towards professionalisation and portfolio landlord activity over the past few years, utilising limited company vehicles and becoming more active in higher yield-generating property purchasing such as HMOs and multiunit blocks. More of the same here might well propel the market on, and there’s no doubting that those at the more professional end of the landlord spectrum, want to add to portfolios, want to refinance, want to increase their footprint, and need quality advice and excellent lending products/ services/rates, in order to do so.

Advisers who are active in the buyto-let space, and are not recognising the opportunity with portfolio landlords, need to do so quickly, because our view is that here there will be more activity and business to be achieved.

At Foundation we certainly anticipate greater levels of lending in this part of the market, especially when you consider other demographics such as strong tenant demand, poor social housing supply, the continued difficulties for younger people in getting on the ladder, a greater student population and the social mobility needs of the population.

2020/21 could be two years in which the amateur landlord is tempted back in the market, and these players will be the next generation of portfolio landlords.

Overall, we can best sum up our view of buy-to-let as requiring ‘more of the same…and then some’. Those who understand and work with strong, quality lenders like ourselves, will be able to secure significant business – the foundations of the sector are strong, of that there can be no doubt. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Strength to return in 2020 Alan Cleary group managing director, OneSavingsBank and Precise Mortgages

T

he start of a new year – a new decade for that matter – usually brings a round of predictions from industry experts. This year has been true to form, with a range of forecasts predicting steady house price inflation over the year, with the consensus around 2%.

Prospects for house prices are emotive and divide opinion. Those on the property ladder already tend not to want to see prices come down, resulting in them seeing a paper loss on their capital wealth. Those still saving for their first deposit are aching for a fall in property values, with the obvious boon it would offer on improving their affordability.

From everyone’s perspective though, house price inflation at about 2% a year is pretty favourable. It’s steady, which makes planning ahead more predictable, and it’s bang on the Bank of England’s inflation target of 2%, also the forecast for CPI this year according to statistics portal Statista.

If these figures are accurate, it will mean our homes should be rising in value in line with the cost of household goods over the next 12 months.

Wage growth meanwhile looks likely to be stronger: according to research

by ECA International, UK employees can expect to receive a 1.1% real salary increase in 2020 – ahead of inflation.

This is good news for the mortgage market because a steady outlook for asset values and positive prospects for borrowers’ earnings gives lenders confidence to lend. And to keep higher loan-to-values available, though obviously still under constant review.

For first-time buyers who are saving hard to gather their deposits, this will be good news.

Steady asset value growth is also www.mortgageintroducer.com

good for homeowners looking to move, as falls in value can and do throw a spanner in the transaction works for the housing market.

Rather than move, many homeowners over the past couple of years have anecdotally been opting to renovate and extend existing properties rather than foot the stamp duty bill incurred with the purchase of a different home and the added headache of booking that paper loss I referred to earlier.

While that has stoked the remortgage market, supporting overall gross lending in the UK for the past few years, a healthy housing market really needs a strong purchase market as well.

This part of the sector has been subdued for some time now, suggesting that there could be some pent up demand that starts to release this year.

If the government opts to do something about stamp duty at its March Budget, something it has hinted at, it has the potential to deliver a real boost to the front end of the housing market. A choke to get the engine going again, if you will.

There is also some positive news for the remortgage market, with consultancy firm CACI suggesting its analysis shows that £21bn of mortgages will mature in April alone, accounting for some 11% of the £184bn of mortgage maturities due this year.

This highlights the opportunity there is for brokers to get in with clients

early, alerting them to their remortgage options and the range of competitive deals available now.

As the Association of Mortgage Intermediaries pointed out in their latest economic bulletin, 2020 is likely to be the year that product transfers really take off, following widescale investment by high street banks in online portals that allow customers to switch products easily with their existing lender.

We pay product transfer proc fees because we place great value on the fact that brokers are bringing us repeat business. However, AMI’s point indicates that direct channels look set to take some market share from the advised part of the product transfer market.

As a lender that deals only via intermediaries, we believe that clients should be taking advice on where and how to refinance their loan and consider that brokers are best placed to support that.

With this knowledge then, the first quarter of this year should be considered an opportunity to lay the groundwork for supporting clients through this process – particularly when they’re being tempted by the lack of hassle on offer from some high street banks that may or may not provide the most appropriate product. All in all, 2020 looks likely to be a reasonably robust year for mortgages. M I

There is some positive news for the remortgage market

FEBRUARY 2020 MORTGAGE INTRODUCER

21

REVIEW

BUY-TO-LET

More to the market than the Boris bounce Bob Young chief executive officer, Fleet Mortgages

I

t has certainly been an interesting start to the year, with a degree of positivity around the UK housing market that wasn’t always apparent throughout 2019, although – ever the optimist – I tend to believe that it was there, but just needed an outlet in order for it to be released.

Many in the market are talking about the apparent ‘Boris Bounce’, coming as a result of December’s General Election victory for the Conservatives.

While I would suggest there’s some truth to this, in reality – and certainly when it comes to the direction of travel for house prices – that upward momentum was already starting to show itself in the months leading up to the election.

PENT-UP DEMAND

Perhaps, as the chances of that Conservative Party victory began to solidify, there was greater optimism about the pent-up demand that might make its way into market; look at the November 2019 price figures from the ONS and they show year-on-year growth of 2.2%, up from 1.3% in October.

At the end of the year, the Halifax also revealed its 2019 house price figures and they were at the top end of its predictions – up 4% annually – while the latest data from RICS shows strong expectations that prices will continue to rise over the next three months, and its agreed sales indicator also went positive, with buyer inquiries at their highest level since the 2016 referendum.

Of course, it will not need me to tell you that this remains early days, but

22

the indication has to be that 2020 will continue to show further increases in house prices.

Coupled with continued undersupply of new properties and stagnant wage growth – the ONS said recently, that in the quarter to November 2019, wage growth for regular pay (excluding bonuses) actually fell back from 3.5% to 3.4% - we might well expect an increase in demand for private rental properties, which will ultimately lead to rents continuing to rise.

Good news on both counts for existing landlords, especially those in a position to add to portfolios because the buying opportunities are returning.

The introduction of a regulatory and taxation environment over the past three years designed to move property out of the PRS has, to some degree, been ‘successful’ but there are many questions left to be answered around, the true cost of that.

The problem being of course – and this might be seen as very trivial by those who have pursued and introduced such policies – that we actually require PRS properties in evergreater number, not less.

Some commentators continue to push the argument that scaring one/two property landlords senseless, to a point where they sell their properties and exit the PRS, has been a good thing for the UK housing market. I would disagree vehemently.

We talk a lot in this sector about the shift from ‘amateur’ to ‘professional’ landlords –I’ve done it myself – under the guise that ‘amateur’ landlords selling their properties is overall a good thing because they are somehow a law unto themselves, they can’t be trusted, they won’t treat their tenants right, and don’t take their responsibilities seriously.

But, that’s a rather offensive way to look at things. It’s not really about ‘amateur’ or ‘professional’ landlords at

MORTGAGE INTRODUCER FEBRUARY 2020

all, is it? These are just terms – what it should really be about is competence?

There’s no doubt you can be an incredibly competent ‘amateur’ landlord with just a few properties to your name, and you can also be a so-called ‘professional landlord’ with a large portfolio that, quite frankly, we wouldn’t touch with bargepole because of the way they run their finances or indeed, the way they run the business of their property portfolio.

TRACK RECORD

From our perspective, whether you are a first-time landlord or one of the biggest property players in the land, it should really be about your competence, and your track-record.

Take landlord ‘newbies’ – the way they manage their personal bank account is one of the biggest indicators that their business matters/buy-to-let properties are going to be run in the same way.

Have they done their research? Do they know what they’re doing and their responsibilities? Can they show in their personal finances the level of management we would expect with a buy-to-let property?

‘Amateurs’ can be a very good lending risk, and given the direction of travel we have seen, and the opportunities available, one might believe that we’ll see more ‘amateurs’ being more active in buy-to-let in 2020.

If you’re competent then you’re not likely to ‘hit and hope’ on a property; you’ll do your due diligence, understand the finances and what is required to make a profit, and you’ll be buying in areas where demand is strong, prices are going up, and rents are following suit.

We should not be so quick to dismiss the ‘amateur element’ because those ‘amateurs’ might have been investing in property for two decades, with half a dozen properties to their name and with the inclination to buy more – they just haven’t been doing it as a full-time job.

Indeed, they have a full-time job already, they’re very good at it and they have no intention of becoming a landlord seven days a week, 52 weeks a year. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Landlords set for greater control Ying Tan founder and chief executive, Dynamo

A

ny new year comes with change. However, with some political stability in the air, let’s hope that the government will not target landlords further – in terms of additional regulatory reforms or tax changes.

Although it’s prudent to point out that we are operating in a sector which continues to come under increased scrutiny, change is potentially never too far away. Which means that anyone operating in the BTL sector has to maintain a certain degree of adaptability. Whilst there is nothing to suggest that the BTL market will come under further government fire in 2020, landlords and intermediaries should be aware of planned changes or legislation which could happen sooner rather than later. So, let’s highlight a selection of these.

New tax relief rules: In 2017–18 claimable tax relief was reduced to 75%, and this reduction continued through 2019–20. In 2020–21, landlords won’t be able to claim any tax relief on mortgage interest payments at all. Instead, from April 2020, landlords will receive a 20% tax credit on their interest payments.

Minimum energy efficiency standards (MEES): The minimum energy efficiency standards (MEES) first came into effect in April 2018, which stated that new tenancy agreements and renewals (other than some HMOs such as bedsits) must have an energy performance certificate (EPC) rating of E or above. However,

by April 1, 2020 (or April 1, 2023 for commercial property) these regulations will be extended to also cover existing tenancies.

Electrical installation checks: It has become increasingly likely that new electrical installation inspection www.mortgageintroducer.com

and testing is going to be required for tenanted properties from 1 July 2020, or 1 April 2021 for existing tenancies.

As always, landlords and advisers need to fully understand all existing and impending regulatory, policy and legislative demands. Many of these have been in the pipeline for some time and, at the moment, there is nothing new on the horizon which should be feared by the vast majority of landlords.

Especially those who are constantly maintaining their properties and managing their tenant responsibilities in a correct and proper manner.

BUILD TO RENT

As well as change and challenges, a new year also brings innovation and the evolution of different concepts.

I recently read a report which suggests that the UK is seeing an influx of American-style purpose-built professionally managed rental homes.

Analysis by Savills for industry trade body the British Property Federation (BPF) found the number of Build to Rent (BTR) homes has increased, with 152,071 BTR homes at various stages of completion in the UK. Of these, 40,181 are complete, with a further 35,415 under construction and 75,475 in planning. This represents an increase of 15% over the last year.

Breaking this down on a regional basis, Manchester and Salford lead the way with almost 23,000 BTR properties either completed or in the development pipeline. Birmingham meanwhile nearly doubled its pipeline from 4,800 BTR homes, to over 8,000, with Leeds, Liverpool, Glasgow and Sheffield all seeing an uptick in BTR activity too. This is an interesting trend which underlines the appetite for alternatives within all areas of the rental market. To maintain some degree of perspective, figures suggest that Built to Rent (BTR) currently comprises less than 1% of the total value of the UK’s private rented housing stock.

However, this growth trend will be an interesting one to follow over the next 12 months, as will its impact

on landlords, investors and the BTL market in general.

INTEREST RATES

Looking at other government focal points and economic trends which might influence the BTL market in 2020, the first few weeks have seen interest rate speculation.

The value of sterling dropped after a trio of officials on the Bank of England’s Monetary Policy Committee indicated that UK interest rates are likely to be cut in the coming months. In addition, December saw inflation fall to its lowest level for more than three years to add further fuel to this assumption.

We have already seen downward pressure on mortgage rates across the mainstream and BTL sectors as a result of increased lending competition and a lowering of the base rate will inevitably offer lenders further scope.

Not that we aren’t already operating in an environment where the cost of borrowing is highly attractive to homebuyers and landlords. For example, Property Master’s January 2020 Mortgage Tracker found that the cost of 5-year fixed rate BTL mortgages has resumed a downward trend. The biggest month-on-month fall in cost was for 5-year fixed rate BTL mortgages at 50% LTV, falling by £15 from December to January.

In regard to 5-year fixed rate deals at 65% LTV, costs fell month-on-month by £11 while 5-year fixed rates at 75% LTV saw a monthly decrease of £3. Meanwhile 2-year fixed rate BTL mortgage offers for 65% and for 75% of the value of a property fell by £3 per month each from December to January.

2020 will see landlords taking even greater control of their portfolios to reduce costs and maximise efficiency.

Lower borrowing costs will help landlords negate some of the tax and regulatory changes which continue to impact their investments, and the role of the advice process will become even valuable across a range of portfolio needs to bolster rental yields and profit margins. M I

FEBRUARY 2020 MORTGAGE INTRODUCER

23

REVIEW

BUY-TO-LET

Landlords considering their options Jane Simpson managing director, TBMC

A

s the end of the financial year approaches, buy-to-let investors will be mindful that mortgage interest tax relief will be phased out completely in April.

The significant rise in limited company buy-to-let mortgages is a clear indicator that many landlords are considering the tax advantages of using a corporate structure for their property investment businesses. At TBMC we are frequently asked by direct clients whether or not it is a good option for them. We always recommend seeking

tax advice, but intermediaries can also provide information that could assist in the decision-making process.

For example, if a landlord client is seriously weighing up the benefits of setting up an SPV, providing mortgage illustrations for both personal name and limited company products could help calculate the overall cost savings involved. Historically, limited company finance has tended to be more expensive than personal name finance although the gap is narrowing, and some lenders no longer distinguish between the two applicant types. In any case, it can be useful for landlords to be able to compare potential monthly repayments when deciding which route to take.

It is difficult to predict what effect the current political and economic

climate will have on interest rates in 2020 as Mark Carney prepares for his departure from the Bank of England and Andrew Bailey gets ready to step in. It has also been predicted by industry pundits that the buy-tolet remortgage market will slow in 2020 as more landlords are choosing 5-year fixed rates which lengthens the remortgage cycle for intermediaries arranging finance for them. However, mortgage rates are still very low and now could be a good time for landlords to examine their whole portfolio to make the most of these deals.

If landlords start to feel more confident about the UK economy in the coming months and are considering expanding their portfolios, releasing equity from existing properties is a popular way of providing a deposit for a new property purchase.

For brokers working in the buyto-let sector there will be plenty of opportunity to support their clients in 2020 and being aware of the issues landlords face will enable them to provide a much needed and valued service. M I

Mortgage Business Expo 2020 Evolving financial business since 2002 MBE is the established expo where financial intermediaries can meet face-to-face with leading lenders

NEW FOR 2020!

Leeds | The Armouries 30th April 2020 VIP package for early registrants

Our tailored VIP package includes: (Available to the first 250 delegates who register)

• A dedicated meeting area for VIP guests only • Complimentary breakfast and lunch • Free refreshments • Super fast wifi access • Daily newspapers • VIP goody bag

+ earn CPD Hours in the free to attend seminars with Bank of England keynote

REGISTER FOR FREE NOW mortgagebusinessexpo.com

INTERVIEW

FLEET MORTGAGES

Stronger than Mortgage Introducer caught up with Mike Lane and Steve Cox at Fleet Mortgages to discuss challenges, lessons to be learnt and how they are driving the lender forward

2

019 was an eventful year for many mortgage market stakeholders, but perhaps few had such a tumultuous year as buy-to-let lender, Fleet Mortgages. Having to close its doors to new business in the first week of January last year would not have been the start it would have wanted. However after a three-month period away – and with significant new levels of funding – it came back to the market stronger than ever in April.

Now at the start of a new year, and with significant ambitions for the future, Mortgage Introducer caught up with Fleet’s chief operating officer, Mike Lane, and distribution director, Steve Cox, to talk through the challenges Fleet faced, the lessons to be learnt, and how they will both be driving the lender forward.

our professional relationships before coming back to lending on 9 April. Since returning, Fleet has completed £400m of new origination effectively in a six month period in terms of completions, but also ended the year making a small profit.

What would you say are the key challenges you have faced over the past 12 months?

ML: Clearly the past 12 months were shaped by our start to 2019, and the key challenge was to recover and rebuild the business. We had a very clear focus on what we needed to do with funding but we still needed to ensure the business was fit for purpose on our return – there was not much point in having funds without the ability to use them. This moved our

How was 2019 at Fleet?

Mike Lane: 2019 can only be described as the most amazing rollercoaster ride and one that I have no desire to experience again. Coming into the year on the back of an excellent 2018 with a solid pipeline, in early January - and with no notice - we lost our funding through no fault of our own, resulting in us having to withdraw our entire product range. However, we met the challenge head-on and focussed our efforts in three key areas. The first was honouring the entire pipeline to ensure good outcomes for customers and intermediary partners. Secondly it was about finding alternative funding – because of our financial strength we were actually in the luxurious position of being able to trawl the market to find the best long-term partner. Lastly, and probably the trickiest, was to keep our hard-earned intermediary relationships engaged and fully updated so when we did return to market, we were able to pick up where we left off.

Steve Cox: And we achieved that. Fleet never let a single pipeline customer down, we reached agreement with a new long-term funding partner, and maintained all

26

MORTGAGE INTRODUCER

FEBRUARY 2020

Steve Cox and Mike Lane

INTERVIEW

FLEET MORTGAGES

n ever

recognise the value Fleet can add to the origination process for everyone involved. By choosing the right funding partners interested in long-term relationships we have provided stability in the market. Our unique position within the market provides greater flexibility with both criteria and products and, even though we are not restricted by PRA regulations, rating agencies continue to see Fleet in a positive light.

focus to people – we made a very quick decision on this. We had high-quality individuals and had spent years putting together this team, so we would need them when we came back to market. Through some internal flexibility and a large dose of local volunteering for worthy causes, we maintained all but two of our original complement when we returned to lending.

SC: It’s also not enough for us to simply sell products to our intermediary partners we want to help them understand the intricacies of the more complex buy-to-let market and our field teams deliver a huge programme of educational support for advisers in conjunction with our intermediary partners across the country.

SC: As for our intermediary partners, we made every effort to keep them informed throughout our search for a suitable long-term funding partner. The reality is we could not be more grateful for the fantastic continued support and good will shown to us during our absence.

What new products did you launch in 2019 and what have you got planned in terms of proposition in 2020?

The market is becoming increasingly competitive.

How are you making sure you stand out from the crowd?

ML: We have always recognised that no one has a divine right to get business from anyone – it must be earned. What Fleet does have, though, is extremely knowledgeable people who understand the difference that good service and quality decision-making makes to our intermediary partners – from consistent 24-hour turnarounds to being able to talk to underwriters we

ML: We’re constantly reviewing the market to ensure our product set is both competitive and current.

During 2019, we introduced valuation-free products, reintroduced an extensive 80% LTV suite and added HMO payrate options. In addition, we place great emphasis on broker feedback which allows us to look on an ongoing basis at our criteria and assess how this can be adjusted to provide better outcomes. This could relate directly to the propert or to the loan itself. We are currently looking at a large HMO offering as well as the possible introduction of a cashback product.

What are your lending ambitions in 2020?

SC: We enter 2020 with a very healthy pipeline, and we’re recruiting more field BDMs to support this growth. Given our 2019 completions were effectively for a six-month period, there’s no reason to think we cannot achieve £800m this year and then push towards £1bn. As the buy-to-let market shifts to the more complex end of the spectrum, Fleet’s experience in these sectors puts us in a great position to support our intermediary partners, drive growth and preserve our service proposition.

What are your predictions for the buy-to-let market in 2020? Do you see the regulatory landscape becoming harder for landlords?

MI

www.mortgageintroducer.com

ML: During the 12 months to the end of November 2019, UK Finance said gross lending in the buy-to-let market came to £39.4bn – similar to lending volumes in 2018. Looking forward, UK Finance believes the market might drop to £36bn this year before it bounces back to £37bn in 2021. While we don’t necessarily share this pessimistic overview we do believe the specialist sector within the buy-to-let market will grow in 2020. M I FEBRUARY 2020

MORTGAGE INTRODUCER

27

We promise not to add loading to your rate Unlike some other lenders, we don’t load your rate. No matter how weird and wonderful the case, we simply base our rate on the LTV. No matter where your client lives, how many holiday lets they have, or how many rooms there are, you can be sure of where you stand from the start.

We offer

Lending to

Lending on



Innovative product range up to £15m



Up to 75% Net LTV lending (Arr. fees can be added)

   

No maximum age

       

       

No minimum income Fixed rates for 2 or 5 years Interest only terms up to 30 years

Specialist BTL

Limited companies Trading companies Expats Trusts and offshore Foreign nationals LLP’s Charities BVI based companies

Semi-commercial

Large and small portfolios Holiday lets HMOs Semi-commercial Serviced accommodation Sitting tenants New build flats Purpose-built student accommodation

Bridging

T: 020 7862 6244 E: specialistmortgages@htb.co.uk FOR INTERMEDIARY USE ONLY | © 2020 Hampshire Trust Bank Plc is authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and the Financial Conduct Authority. Our FRN number is 204601. We are a company registered in England and Wales, registration number 01311315.

Registered office: 55 Bishopsgate, London EC2N 3AS. Hampshire Trust Bank, HTB and

are registered trademarks of Hampshire Trust Bank Plc.

REVIEW

TECHNOLOGY

Always ask awkward questions Alain Desmier co-founder and managing director, Contact State

O

n a weekly basis, the Advertising Standards Agency (ASA) hands out rulings and fines to marketers and brands that break its rules. These rulings are increasing in severity and frequency as consumers become more adept and familiar with how they are able to complain.

I believe it’s time mortgage professionals everywhere start to ask uncomfortable and awkward questions about online mortgage advertising. Are we really doing all we can to protect consumers who seek mortgage advice online?

I have three very awkward questions for you to consider: 1. Does the mortgage industry have an advertising compliance problem?

2. Do some online mortgage adverts specifically and deliberately target vulnerable customers?

3. Are you concerned about the level of marketing due diligence in your firm?

Your answers to these questions matter a great deal to the consumers we are all trying to help and of course to the ASA. An increased level of scrutiny of financial advertising makes it more likely than ever that 2020 will see a major fine for the mortgage industry.

Let’s analyse each question in turn: Does the Mortgage industry have an noncompliant advertising problem?

As I write this article, a quick search of “online mortgage world” turns up some fairly unsavoury and noncompliant adverts, within seconds: A number of mortgage lead generation sites are pretending to be a lender. For example, type “Santander quote” on Google, and you’ll find numerous sites bidding on this banking brand, tricking the consumer into believing they are indeed Santander and directing

www.mortgageintroducer.com

them to a lead form. When you fill the form in, the lead matches to a regulated mortgage business.

On Facebook consumers are offered mystery remortgage rates of 1.29% without any overall cost for comparison given on the landing page or even what product the rate relates to. When you fill the form in, the lead matches to a regulated mortgage business.

On major publishing sites, would be mortgage customers are targeted by native adverts, telling them that about a ‘little known rule allows homeowners to switch their mortgage at a lower rate’, again, without any evidence of such rules.

When you fill the form in, the lead matches to a regulated mortgage business.

These examples (all live as of February 2020) are providing thousands of mortgage leads every day to a whole host of regulated mortgage brokers and lenders. On a significant scale, non-compliant mortgage advertising is happening.

TARGETING THE VULNERABLE

Misleading online financial adverts are particularly bad for the mortgage industry because of the way they target vulnerable people. Every FCA regulated business signs up to ‘treat the customer fairly’ but this most basic promise is being broken, every single day.

Type in “bad credit remortgages” and you’ll find some genuine brokers and lenders advertising specific, legitimate services. You’ll also find lead generators making promises that simply can’t be substantiated. One website I reviewed implored consumers with bad credit to ‘take our 60 second quiz to get pre-approved in minutes’. Getting pre-approved actually meant filling in a data capture form and being sold to the highest bidder (also a regulated mortgage business).

Targeting consumers in desperate situations with make believe processes,

for products that don’t exist, is a clear ASA breach. If you buy leads or work with online introducers of leads or hotkeys, are you absolutely sure that a consumer that ends up with your firm, didn’t themselves start their customer journey in this way?

If you can’t, the time to act is now.

There are a number of steps that mortgage brokers and lenders can take to ensure they stay on the right side of the advertising regulator by scrutinising the information that external marketing agencies tell them about landing pages and adverts used to attract consumers.

For example, you can work with a lawyer to construct a marketing contract that sets out what you will and won’t accept when it comes to mortgage advertising. Specifically list out the sort of example phrases you are not willing to accept and proscribe the various privacy policies and wealth warnings that you expect to see on the partners website to ensure the landing page complies with the law.

Be your own regulator, do your own market research into lead partners and ask awkward questions when consumers tell you that they applied at a website you are unfamiliar with.

From the smallest broker to the largest lender, the ASA are watching and you need to be ready. M I

Scrutinise the information used to attract consumers

FEBRUARY 2020 MORTGAGE INTRODUCER

29

Short Term Lending

Fast & flexible.

We’re proud to do things differently to support the professional investor and landlord community with award winning short term and refurbishment loans.

Loans from £50k to £15m Up to 75% LTV with terms to 24 months Minimum personal guarantee of 25% of the loan amount (available on non-refurb STL only) Existing Customer Discount of 0.25% off the arrangement fee With our Lending for Refurb Costs product addition, applicants may borrow up to 100% of the refurbishment costs on a single larger facility

Get in touch today

0330 123 4521 cm.broker@shawbrook.co.uk property.shawbrook.co.uk

THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS

REVIEW

TECHNOLOGY

Joining the tech dots together Neal Jannels managing director, One Mortgage System (OMS)

I

s 2020 finally the year that the mortgage market gets its act together and harnesses the power of fintech to improve service standards and create a simpler mortgage journey?

This remains to be seen, but advances are being made all the time with new entrants and disruptors constantly shaking up the property and mortgage worlds.

Late last year, M:QUBE announced that it had secured £5m in seed funding to support its mission of ‘transforming the UK mortgage market’. It aims to digitise and automate the entire application process using data, deep learning and sophisticated technology to deliver mortgages in minutes.

NEW TECHNOLOGY

Interestingly, the business will work exclusively through mortgage brokers, using its partnerships with lenders, investment banks and asset managers to offer a broad range of highly competitive products. This is a concept which I will certainly be following with interest.

Another thought-provoking recent launch from a tech standpoint came via Yourkeys. The firm has recently completed what it says is the first fully digitised end-to-end property transaction.

The proposition ties together all of the major stakeholders in the transaction including conveyancers, mortgage brokers, lenders, housebuilders and estate agents. It is said to have reduced the time to reach exchange of contracts from the industry average of 63 days, down to just 11 days.

Whilst currently focussing on the new build sector, it’s reported that the technology will be ready to process sales of older properties by the www.mortgageintroducer.com

second quarter of this year. For fear of repeating myself, this is another story worth tracking over the course of the next 12 months.

Lenders are not being left behind.

Nationwide is currently trialling new technology which enables third party systems to connect with its credit risk and back office systems via APIs. The aim is to reduce the time it takes mortgage brokers to source and submit client applications, and this comes on the back of Nationwide investing £4.1bn in technology over a 5-year period.

Education remains key for the intermediary market when it comes to investing in the best forms of technology to support individual business needs. As such, it was great to see a brand-new industry event introduced into the calendar to assist advisers with their tech requirements.

The Future Adviser Event – described as an immersive, techfocussed event with education as its key driver – will offer forward-thinking advisers the chance to explore the changing face of financial services.

The event will also feature ‘unrivalled learning opportunities and unique tech-based zones’.

The more we discuss a range of tech requirements, the better position we will be in – as an industry - to develop and integrate solutions which can make a real difference at all levels.

Will fintech deliver mortgages in minutes?

We are operating in a mortgage market, which not only needs change but now actually appears to be in a position to embrace it, rather than fight it (as has been sometimes the case in times gone by).

LEGACY ISSUES

Of course, there remain many legacy issues to overcome, especially when it comes to systems being used by larger lending institutions.

The transition from a traditional mortgage model to a digital solutionsbased mortgage model is an ongoing process requiring a well-structured plan which reflects the holistic direction of the lender in question.

This is all about transforming the mortgage journey over the long-term, not about putting plasters on any system leaks.

However, it does feel like lenders have turned an important corner and it’s the smaller players and fintech disruptors (not necessarily those who just make a lot of noise) which are forcing this to happen.

In terms of intermediaries, we are seeing an increasing number of firms taking advantage of customer relationship management (CRM) systems (like OMS) to help manage customer data, support sales management, deliver actionable insights, integrate with social media and facilitate team communication. In addition to CRM’s, advisers are now looking for far more from their sourcing systems and features such as lender integration, audit trails, AVMs and credit searches are helping to cut admin burdens across the board.

Collaborative tech trends have helped other financial service sectors to lead the digital revolution and leave the mortgage market trailing in their wake.

Whilst we can’t, and shouldn’t, be looking to transform the mortgage journey overnight – the sooner we join some of the positive fintech disruptor dots together, the quicker and simpler it will become for all links in the mortgage chain. M I

FEBRUARY 2020

MORTGAGE INTRODUCER

31

REVIEW

TECHNOLOGY

Mortgages of the future – 2025 David Bennett commercial director, eKeeper

T

he year is 2025, a time of advancement and technological marvel, where we go to work or the shops in our rocketships, safe in the knowledge that post-Brexit, the United Kingdom is a global power-house buoyed solely by the sale of Spitfires and rationing.

But what ripples and trends in the tech world today are going to impact how advisers advise and service clients in the near future?

In an industry that is slowly picking up the pace in terms of complementary technology, where the API agenda has started to gain momentum with people continuing to exclaim wonder over a 20-year old technology, what aids and challenges will the intermediary face not this year but in 2025...?

DEEP FAKE

Many of us could be forgiven for not knowing of the Chinese social media influencer, Qiao Biluo, whose gentle voice and manga-esque looks turned out to be the product of live video software.

Once seen as a novelty, video processing software can alter the appearance and sound of an individual in real-time, presenting a visual that is difficult to detect from the original. In the case of Qiao Biluo, due to a glitch with the software, she was revealed not to be the cute goddess adored by thousands, but a middle-aged lady in her back-room.

Such software demonstrates the emergence of Deep Fake, the term used to describe software that brings to life deceased actors and use them in our favourite movie spin-offs.

32

It is also the software behind the unsavoury trend of revenge porn, where an individual, armed with a small sample of images, can transpose an ex-partner onto the image of a colleague or someone else and release the amended and salacious material to hurt, embarrass and slander.

Deep Fake presents a challenge to the likes of enhanced identification verification (eIDv), which triangulates against other forms of identification in order to confirm an individual is who they purport to be. Modern examples include neo-banks Monzo and Starling, etc., that use a combination of recorded video and identity documents to verify who an individual is. eIDv is becoming the gold standard for financial services, but given the demand by time-poor clients to have immediate attention and responses, and a proclivity for advisers to provide advice remotely via video and messaging platforms, physical and tangible identification may in fact become mandatory as the world becomes more digitally connected.

This could even regress back to advisers needed to sign photocopies of statements and ID documents.

MOBILE IS FASTER

As with most revolutions, they often start with a whimper. The introduction of the 5G network in 2019 was just another advertising bullet point in the competitive and congested mobile phone world until the Huawei debate erupted. But by 2025, with our Chinese overlords sated with conversations about picking up milk, the 5G network will provide ultra-fast internet connectivity, easily outpacing existing broadband speeds by some margin.

Such connectivity will likely see another change in user behaviours, it may well mean that the likes of video chatting and augmented reality

MORTGAGE INTRODUCER FEBRUARY 2020

(think of seeing the world like ‘The Terminator’, but without the shooting or tired catchphrases) becoming, not generally accepted, but the norm.

While our mobile devices will improve in terms of speed and power, faster connectivity allows complex technical interactions to be “farmed off” to more capable machines with results returned quickly and efficiency to the end user.

The reality of an individual walking past a property for sale and determining whether they can afford the purchase will no longer be a finger in the wind affair.

DEEP FAKE

Your phone will instead have the ability to read the house’s GPS position, capture the address through the estate agency platform and process a pre-completed electronic mortgage passport.

This passport would source the hard facts from a credit agency and use effective open banking integration to provide a whole of market, soft footprint, DIP check prior to any provision of advice.

This is not rocket science, it is simply about orchestrating different technologies efficiently. Many of these products are currently available today, or in their infancy.

They will continue to mature and become more efficient, ultimately with the capability to bring match user desire with available data and turning it into relevant and pertinent information which will transform both the speed and the effectiveness of all transactions.

Technology will continue to remove the inefficient “human” element or look to subvert it.

For a broker now and into 2025, it is key to firstly understand technology, its impact and effects; secondly, that there’s one thing it will unlikely subvert, advice.

The journey 2025’s clients take to require advice along with challenges in servicing clients will certainly change, but life changing transactions as substantial as a mortgage, will continue to see clients wanting to know they are dealing with a real person at the other end of whatever we’re talking into. M I www.mortgageintroducer.com

REVIEW

TECHNOLOGY

Change best delivered one step at a time Steve Goodall CEO, ULS Technology

S

uccess stories in tech are becoming something of a rarity as we move into a new era of scrutiny. It’s a truth that has been universal for thousands of years: what goes up, must come down.

The Romans knew this truth as the wheel of fortune. Shakespeare wrote the greatest plays in English history on the idea that great men (and women) fall. Whether it is a literal fall from grace or a reputational one, it’s not a stretch to characterise technology giants in a similar vein.

First heralded as pioneering firms out to disrupt the corporate stranglehold across industries by democratising, representing and supporting consumers - companies such as Amazon, Alphabet (Google), Facebook, Spotify and Netflix are now facing the scrutiny as large companies.

They now face trials by Congress and Parliament and are pursued by regulators for billions in what governments and increasingly consumers view as unpaid taxes.

In late January proposals from the Organisation for Economic Cooperation and Development were published, designed to force tech firms to pay more tax in countries where they make sales and profits, even if they do not have a physical presence. Tech firms are, perhaps unsurprisingly, not impressed.

This is not a helpful profile for the many other tech firms quietly and legitimately making inroads and delivering change into less glamorous parts of business. Technology has been given status as a game-changer in nearly all walks of life.

www.mortgageintroducer.com

Fintech, insurtech, proptech, medtech, biotech, driverless cars, battery tech that will remove the need for fossil fuels – these are just a handful of industries that have seen improvements come as a result of better use of technology and data.

Often the developments which garner the most attention are those that move an industry or process forwards in leaps and bounds. Incremental (yet often more substantive) change gets lost amongst the noise. Sometimes the headline acts attract the wrong type of attention, leaving the genuinely progressive changes tarred by the same brush.

Facebook and the Cambridge Analytica scandal harmed consumer trust in digital firms that lean heavily on the gathering of personal data irreversibly, in the short-term at least.

Add to this the new dawn of open banking and there is much scepticism and fear by those terrified of being scammed or manipulated if they share their data. As technology develops and delivers improvements, there are inevitable mistakes that accompany that progress. However, high-profile errors cost everyone – high street banks may live in fear of the reputational risk that accompanies massive IT outages.

TEENAGE KICKS

However, getting it wrong some of the time is how we learn – it’s how we have always learned. The deployment of smart technology, artificial intelligence, the use of analytics to make sense of big data – these technologies really took off at the start of the last decade.

They are beginning to mature, reaching their teenage years, if you will, which may explain why an element of disillusionment is now setting in.

I’ve seen various industry posts (on social media, ironically) and heard views shared at events that suggest there is a sense of technology fatigue

marring the mortgage market. Indeed, several significant self-styled digital businesses in the advice sector have seen significant staff changes and/or a refocussing of their business strategies over the past 12 to 24 months.

This does not mean that technology has failed in the mortgage market. It means that we are learning how to use it and how to integrate with it better, through experience of it in action.

There are lots of things governing the structure of the housing market and the purchase (and remortgage) transaction process. Not least the people involved in the different stages of this process.

“As technology develops and delivers improvements, there are inevitable mistakes that accompany that progress.

However, high-profile errors cost everyone” Rather than abandon hope for technological progress that helps to support better customer (and broker/ lender/conveyancer) experience, perhaps there is cause for some optimism if we look to incremental change rather than step changes.

When we launched DigitalMove, our integrated conveyancing platform for consumers, brokers and solicitors in January last year, we did so through pilot schemes – testing and learning as we went. Now the total number of instructed DigitalMove cases exceeds 5,000, with the vast majority of our firms now taking instructions from us via the platform. These figures are significant and justify our recent commitment to an investment programme which will accelerate a further roll out of DigitalMove across the industry over the next two years.

Home buying is undergoing daily, incremental change. We have come on greatly in the year since we launched, but what has characterised that progress has been that its been robust and gradual. You will not hear spurious claims from us about re-inventing the process. Just the evidence that we are doing so. M I

FEBRUARY 2020 MORTGAGE INTRODUCER

33

REVIEW

PRODUCTS

Blurring mortgage product boundaries Ken Hale head of lending, Harpenden Building Society

B

rexit, intercontinental trade wars, quantitative easing, house price escalation. Back in 2000, when people were getting anxious about the Millennium Bug, very few would have believed that we would be grappling with the big political and economic questions that we are experiencing right now.

In addition to these, there are other less obvious factors that are shaping the way we live. For anyone in the mortgage industry, these changes are creating increasing levels of complexity.

At Harpenden Building Society, we have seen more and more brokers coming to us seeking help with highvalue, complex mortgages. There are many reasons we are seeing this change and we think the trend is likely to continue.

CHANGING ATTITUDES TO WORK

Since the days when we all realised the Millennium Bug posed no threat to our technology systems, the number of self-employed workers has been on the up in the UK. The total increased from 3.3 million in 2001 to 4.96 million in May 2019, according to the Office for National Statistics (ONS).

The self-employed now account for around 15% of the working population, and behind these headline figures are some important trends.

People at the start of their careers are increasingly keen to become their own boss. A total of 181,000 16 to 24 year olds were classified as self-employed in 2016, up 74% from 104,000 in 2001.

The most rapid increase though has occurred among the over 65s. Since

34

the 2008 recession, the number of self-employed workers aged 65 and above grew from 159,000 to 469,000.

The largest number of self-employed workers overall remains in the 45 to 54 age group.

is becoming harder as homeowners come in many shapes and sizes. What if you have a 55 year old self-employed person who wants to borrow money into their retirement on an interest only basis?

Recently, we had a case where a business consultant wanted to remortgage a house to buy a second home. Despite a consistently healthy income over many years, he was unable to find a provider to lend him the money. We were able to find a solution after looking at his circumstances in greater detail.

LATER LIFE LENDING

In June’s Mortgage Introducer, the Centre for Economics and Business Research forecast that the later life lending market would almost double in size over the next decade. In this time, it is anticipated that the over 55s will go from owing £295bn in 2019 to £548bn in 2029. This comes as no surprise to us at Harpenden as we are seeing later life lending becoming more popular.

More people are looking to take out loans later in life to help fund their children’s deposit or move to a larger home, and accept that they will be making mortgage repayments into retirement. The money is also being used to fund social care for themselves or their parents.

In light of these social changes, many lenders are launching specialist niche products for specific needs. Selfemployed mortgages are on the rise.

Retirement Interest Only products are increasing. Contractor mortgages, the list goes on.

However, defining discrete segments

Lenders are launching more niche products

MORTGAGE INTRODUCER FEBRUARY 2020

FLEXIBILITY IS CRITICAL

We were able to lend to him and he bought his new property. After completing the transaction, we talked about his whole experience of buying his new home.

He was frustrated that the vast majority of lenders were unable to put his circumstances through their algorithm and provide a positive answer. The brokers seemed powerless to help. All the conversations were about different product types and, quite simply, he wasn’t interested.

The name, the discount, even the rate. He just wanted someone to take the time to understand his employment history, and talk to him about his income potential and future plans.

While he was unable to provide contracts for his income, he was able to demonstrate that he had consistently earned enough to afford the amount of money he wanted to borrow.

Above all, he wanted someone to be flexible and to avoid technical conversations about product types.

What does all this mean for the industry? As the levels of economic and political uncertainty remain high, flexibility and judgement will be the most valuable characteristics when assisting clients.

The length and breadth of the product range will largely be irrelevant, particularly for people on higher incomes. It may become harder to match the clients’ needs to a niche product as their circumstances become increasingly complex, and do not fit neatly into either one product or another. M I www.mortgageintroducer.com

C

M

Y

CM

MY

CY

CMY

K

C

THE ADVISER HUB REVOLUTION

M

Y

CM

MY

CY

CMY

K

JOIN THE N REVOLUTIO paymentshieldadvisers.co.uk/adviser-hub

#illuminate 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 2020. 01580 02/20

REVIEW

GENERAL INSURANCE

A look inside a GI provider Rob Evans CEO, Paymentshield

I

usually use this column to talk about the market, the opportunities within general insurance (GI) and ideas that could help you to grow your business. But, on this occasion, I thought I would do something a little different.

As CEO of Paymentshield, I see the activity that goes into delivering the business results, so I thought it would be interesting to share and celebrate some of the activity behind the scenes in a GI business and some of the things that I think make the people of Paymentshield special.

RECORD NUMBERS

Last year was a busy and successful 12 months for Paymentshield and we welcomed more than 107,000 new customers, which is a 10% growth on the previous year and double the number of new customers in 2015.

“Throughout the year we generated nearly 500 online reviews of our products and service. The overwhelming majority were very happy, but a huge benefit has been our customers helping us identify areas to fix, improve or innovate” We also massively grew our lettings insurance business with 27,000 new customers – a 75% increase on 2018.

As with any business, retention is just as important to us as new sales and keeping customers depends on having good service.

With 93% of customers renewing their policy, we could think ‘job done’

36

MORTGAGE INTRODUCER

but that isn’t really our style. So, during 2019, we invested in getting as much honest and open feedback as possible by encouraging customers to review us on Trustpilot, Feefo and Google.

Throughout the year we generated nearly 500 online reviews of our products and service. The overwhelming majority were very happy, but a huge benefit has been our customers helping us identify areas to fix, improve or innovate.

TECH TAKES CENTRE STAGE

Using technology to help our advisers sell more and manage their clients more easily has been a key area of focus.

During the year we made a total of 15 enhancements to our Adviser Hub, including the launch of a GI Book Breakdown, Pending Policies On Risk Tool and Expired Quote functionality.

We also launched an entire suite of new APIs, creating a new standard in flexible system and data integrations.

We were extremely proud that our achievements were recognised when we were the only insurance company named in the Top 75 Tech and eCommerce firms for 2019.

The result? More intermediaries used Adviser Hub in 2019 than ever before.

Throughout the year 10,615 individual advisers have logged in and transacted on the platform 448,908 times. Also, more than 78,000 policyholders registered to receive their insurance documentation via our online customer portal.

As well as Adviser Hub, we continued to invest in our website and developing resources that help advisers to grow their GI income.

During 2019, 11,500 adviser resources were downloaded from our website and we welcomed 900 new followers to our adviser social media accounts, where we share all of the content that we produce to support advisers with their GI conversations.

We have also not slowed down when it comes to more traditional communication methods. Last year, we received 272,574 phone calls, including

FEBRUARY 2020

203,801 from policy holders and 68,773 from brokers. And we handled more than 650,000 items of post.

GIVING BACK

One of the privileges of being part of a successful business is we can choose to do the right things, even if they cost us a little financially.

More than ever in 2019, environmental issues came to the fore. Greta Thunberg’s presentation to the UN had global reach and, here at home, David Attenborough’s Blue Planet series raised awareness of the impact of waste plastic on our oceans and wildlife.

We have long tried to reduce our environmental impact and in 2019 we removed single use plastics from the office.

In May, we stopped using plastic cups and instead we provided all 250 employees with a reusable water bottle.

We also stopped using single use plastic cutlery in our canteen, replacing them with plant-based cutlery that will decompose within 6-12 weeks.

In all, we’ve saved more than 70,000 plastic items a year from entering the ecosystem.

Finally, and probably the thing I’m most proud of, Paymentshield employees raised more than £8,000 and volunteered 100’s of days of their time for our charity of the year, Merefield School – a school local to our head office that helps children with severe physical and learning needs.

LOOK TO THE FUTURE

All businesses are judged on their results, but there is so much that must be in place for success to be achieved and sustained. The most important thing though is we’re not done, and we never will be.

The biggest reason I am confident we’ll continue to be successful is we want to be better, at everything, every day. So, watch this space.

I hope your 2020 is as exciting, challenging, rewarding and successful as I expect ours to be. M I www.mortgageintroducer.com

NOT ALL LENDERS ARE VANILLA That's why we treat every case individually, using real people and not just system generated responses to help your customers to own homes.

• • • • •

DEBT MANAGEMENT PLANS acceptable SELF EMPLOYED 1 year trading (2 years trading if over 85% LTV) LARGE LOANS of up to £2m up to 80% LTV (or £1m up to 90% LTV) CONTRACTORS income calculated on current weekly contract x 46 NEW BUILD 90% LTV for houses and flats (£75k minimum valuation)

Discover a Difference Call 0800 111 020 or visit kensingtonmortgages.co.uk No application fees I Products with free legals or £250 cashback and free valuation available Kensington and Kensington Mortgages are trading names of Kensington Mortgage Company Limited. Registered in England & Wales: Company No. 03049877. Registered address: Ascot House, Maidenhead Office Park, Maidenhead SL6 3QQ. Kensington Mortgage Company Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 310336). Some investment mortgage contracts are not regulated by the FCA. THIS INFORMATION IS FOR INTERMEDIARIES ONLY

standard

We’re not a one trick pony.

Now offering new

Non-Standard Home Insurance

- Quote in 20 seconds and buy online -

C

M

Y

CM

MY

CY

MY

K

2017

call: 0344 844 3844

visit uinsure.co.uk

Uinsure Limited is Authorised and Regulated by the Financial Conduct Authority No. 463689. For intermediary use only.

ly.

REVIEW

EQUITY RELEASE

Consumer debt and equity release Claire Barker managing director, Equilaw

R

esearch published by the equity release lender, More2Life, has established that levels of unsecured borrowing are continuing to rise sharply amongst the over 55s, with the number of people who have been in debt over the past five years and have borrowed using credit cards found to have increased from 37% in 2018 to 54% in 2019.

In addition, the report found that the number of over 55’s with unpaid bills has also risen dramatically over the past 12 months (climbing from 8% in 2018 to 16% in 2019), with almost a third using overdraft facilities or savings accounts to cover living costs and other day-to-day expenses- a shocking statistic.

Yet, as stark as these figures are, they only tell half the story. Indeed, more2life has reported that the total value of debt held by the over 55’s has risen by almost 50% in the past five years, with figures projected to grow by a further 35% over the next five years to an overall value of £397bn, while the total value of debt owed by the over 65’s has also spiralled (from £86bn in 2018 to £91bn in 2019), with figures estimated to grow by a staggering 117% over the next decade - an incredible figure.

Experts have attributed this scenario to a combination of factors, with increases in house prices and the age of first-time buyers identified as leading to higher mortgage values and longer repayment periods.

Moreover, the more2life report has found that the number of over 55’s who are using credit cards to pay off mortgage debts has grown to almost one in five over the past year, while research by Canada Life has revealed that the number of equity release www.mortgageintroducer.com

customers using loans to pay off mortgages has also risen, accounting for 49% of all transactions between July and September- a trend which they expect to continue in the coming years.

But, that’s not all. Reductions in the value of pension pots have also played a significant role in driving up levels of debt or financial need amongst this age group, with the value of UK state pensions continuing to rank amongst the worst in the developed world (according to UBS). 59% of retired women and 41% of men currently rely upon pensions, as well as other benefits, to cover half, or more, of their annual incomes (according to the recent English Longitudinal Study of Ageing), while longer life-expectancies and lengthier periods of retirement are already squeezing savings or incomes to their limits.

HOUSING WEALTH

Yet, as economic uncertainty continues to push living costs to new highs and the number of people servicing mortgage debts into retirement continues to grow, so too are more and more retirees becoming reliant on unsecured borrowing options.

However, all is not lost. Research conducted by the property adviser, Savills, has discovered that property ownership amongst the over 50’s currently accounts for an enormous 75% of the UK’s total housing wealth, with years of strong price growth pushing equity values to a combined £2.8tn.

Moreover, figures published by the Office for National Statistics in 2018 have established that levels of ownership amongst retirees living on the lowest disposable incomes have also grown in the past four to five years (by over 15%), with around 660,000 homes falling under this category.

So, the ability to translate this kind of wealth into a single capital payment or to drawdown equity payments to provide a regular and stable source of income is within the grasp of a significant number of pensioners in

this country, offering a chance for those who are afflicted by mortgage commitments or decreasing pensions to service debts and boost existing income values accordingly- a fact that has not been lost on brokers.

“Reductions in the value of pension pots have also played a significant role in driving up levels of debt or financial need” Indeed, Canada Life has discovered that over two-thirds (or 69%) of specialist advisers believe that consumer debt will become the number one driver of demand within the equity release sector over the next twelve months- more than double the recorded figure for last year.

Nevertheless, in order to take advantage of this demand and to stimulate better awareness of equity release products amongst client-bases who are in debt or who are ignorant of the benefits that a lifetime mortgage or drawdown plan could have on their lives, the ER sector will need to ensure that it’s message is being heard and understood by much larger groups of people than at present. Which, as we have mentioned before, places a considerable onus on lenders and brokers to provide the impetus for a new type of service model, embracing a role which encompasses both educational and advisory facets while emphasising the need to help people and change their lives for the better.

And while debt amongst retirees or those approaching retirement age isn’t likely to disappear overnight, there is every reason to believe that a better awareness and knowledge of equity release options could make a significant impact on their ability to lead more prosperous lives and to counter the need for unsecured lending in the first place. Because ultimately, equity release is more than just a commercial proposition. M I

FEBRUARY 2020

MORTGAGE INTRODUCER

39

REVIEW

EQUITY RELEASE

Squaring the consumer circle Stuart Wilson CEO, Air Group

I

t is incredibly early days in both this new year, and new decade, but I get the sense from many others working in the housing and mortgage markets – and indeed our own engagements – that 2020 has started off in an overwhelmingly positive fashion.

Now how much this (for want of a better phrase) ‘Boris Bounce’ would have occurred regardless, is up for debate. I think it’s quite fair, and obvious, to say that without the Conservative’s overwhelming General Election victory in December, the chances of any type of ‘bounce’ would have been incredibly small.

Indeed, I also suspect that many were fearing more of a ‘Corbyn Crash’ than any kind of fillip – we will, of course, never know how this might have played out, but there’s no doubting that the highly-interventionist housing measures that could have been introduced by the Labour Party would have fundamentally changed the entire industry.

For good or for bad? Who can tell?

But I do know, from one individual who is in charge of a lender, that they were fully prepared to pull up the drawbridge on their involvement in mortgages if Labour had won a majority or were going to form a minority or coalition and I know others felt similarly.

What about where we currently sit in terms of housing? Of course, there is also a Budget in March to look forward to, and therefore any views on what might be coming over the horizon for the market, is caveated greatly by any potential measures or actions

40

There is much educational work to carry out in the consumer space

introduced by Sajid Javid next month.

Stamp duty cuts for downsizers, anyone?

That said, when it comes to housing, the numbers tend to tell their own story, and I’m sure many in the sector have been looking at the various new iterations of the house price indices with some interest. After a number of years, when house prices appeared to be redefining the phrase, ‘bumping along’, it appears that we could be on the verge of a push upwards.

There are many reasons for this, not least the ongoing issues governments continue to have in building enough properties, but those supply-side problems do clearly have an impact on the price of properties and the demand in the market for them.

PROPERTY SHORTFALL

This new government has suggested it will be able to build 300,000 new homes by the middle of the decade – the issue being of course that no-one quite believes it can be done, plus we are attempting to make up a shortfall in numbers from the last couple of decades, let alone the last couple of years.

However, for existing homeowners

MORTGAGE INTRODUCER FEBRUARY 2020

at least, the news – from Halifax’s latest house price index, for example, - that UK average house prices rose by 4% last year will be greeted warmly.

Indeed, the bulk of this increase came in the last quarter of 2019 with the anticipation this will continue during 2020 and beyond. In the equity release sector, this increase in potential equity this would bring is clearly a source of interest, especially when increases in valuations might make the ultimate difference in delivering confidence to clients that equity release is the right option for them.

Recent research from Canada Life, which was actually based on the more modest price increases detailed by the Nationwide House Price Index, revealed that the amount of available equity within older homeowners’ properties was now up to over £381bn, which was a £1bn increase from the same period in 2018.

Older homeowners here are classified as being 55 and over, the age at which borrowers are able to access equity release options, and this boost to available and accessible equity might well result in the amount of lending being increased throughout 2020.

Again, research by Canada Life suggests that there is much educational work to carry out in the consumer space, not just to get consumers to visit and contact advisers, and to know where to go to for that advice, but to get them comfortable with the product.

Indeed, those negative perceptions and pure misunderstandings of equity release are, according to advisers, likely to significantly hinder growth. 77% of advisers believe this, an increase from 38% in 2016. 46% said the biggest barrier was consumer awareness of equity release, and it’s an obvious point to make – but totally relevant – that if the client doesn’t understand the product then not only won’t they take it out, but they shouldn’t be going anywhere near it in the first place.

This sector still has bags of potential and there are plenty of opportunities for advisers but we must square the consumer circle, and continue to push the messages around its reality, why it can be the right option, and that advice should always be a non-negotiable. M I www.mortgageintroducer.com

REVIEW

EQUITY RELEASE

Make 2020 the best year yet Alice Watson head of marketing and communications, Canada Life

T

he equity release market has grown significantly in recent years. This is not a fluke, nor an accident.

This is due to a growing ageing population – with an estimated 20.5 million people aged 55 and over in the UK – and house price rises, which have helped expand the total amount of available property equity.

Consequently, this gives the market a strong basis to support the rising number of equity release customers.

It’s also reassuring that this positive potential aligns with the views of 70% of advisers we surveyed who expect the market to grow to at least £5bn by the end of 20204. Notably, one in five of

these advisers expect sales will exceed £6bn. But for these predictions to bear fruit, the industry has to encourage more people to look at their wealth holistically and realise the role that their property wealth can play in their financial planning.

This is where advisers can play a critical role: they can make more homeowners aware of lifetime mortgages and explain how they could help improve retirement lifestyles.

In the first instance, poor consumer awareness of equity release is a barrier to market growth. Having more equity release-qualified financial advisers could be a big boon for the industry.

But, unfortunately, a lack of consumer understanding is also holding back the market. Our recent survey found that 15% of UK homeowners said they wouldn’t use the product to fund their retirement because they don’t understand it. It’s critical for the industry to make information about

equity release more accessible and digestible.

Advisers think that the number one factor that would make equity release more attractive and accessible in 2020 is better education for customers.

And encouragingly, there are signs that a significant number of consumers are aware of the role that their property can play in funding their retirement.

FUNDING RETIREMENT

While this isn’t always the case, property wealth makes up 36% of an individual’s total wealth and private pension wealth accounts for 42%, it does demonstrate that individuals are taking a more holistic view of their assets and how they can fund retirement.

There’s much to be admired about the maturing equity release market, but it’s worth remembering that a healthy market must be nurtured if it is to continue to flourish. M I MI

www.mortgageintroducer.com

FEBRUARY 2020

MORTGAGE INTRODUCER

41

REVIEW

CONVEYANCING

The perils of online conveyancing David Gilman partner in charge, Blacks Connect

R

esearch conducted by the consultancy firm, IRN Research, has discovered that over 60% of consumers who purchased a property in the past two years used a website, such as Zoopla, Rightmove or PrimeLocation to source the deal, yet only 11% decided to use an online conveyancing service to complete the transfer of title- a stark contrast to the number of transactions handled by ‘traditional’ suppliers (63%).

However, the report also found that around 30% of those who did use digital platforms were aged between 18 and 24 years and this has led the authors to conclude that the use of online conveyancing services is likely to increase substantially in the future, “either on national sites, or sites from individual law firms”, as the number of young buyers grows and the preference for digital amenities rises accordingly.

Which, depending on your point of view, is either a sign of progress or as a harbinger for collapsing standards. But which is true?

Well, on the surface at least, there can be little doubt that online conveyancing offers a number of advantages. For example, the lower overheads and absence of disbursement costs means that online firms can often offer deals that are significantly cheaper than their traditional, high street counterparts.

Moreover, the presence of online case tracking facilities means that customers can check the progress of their case in real time and receive updates and document uploads accordingly; a process which is invariably underpinned by national call centre services.

42

In addition, the flexible working hours that online models offer means that customers are no longer constrained by the 9 to 5 shifts offered by local firms, with over a third of consumers identifying access to 24/7 case tracking systems as the most popular ‘additional’ service offered by online companies (according to the IRN Research study).

Furthermore, with many firms offering ‘no move, no fee’ policies (thereby writing off legal costs if a chain collapses), upfront quotes and, (in theory) quicker transaction times, it’s easy to see why many people would be attracted by this style of service; a model which appears to combine ease, transparency and economy. But, as with many service options that appear almost too good to be true, there’s a catch.

TOO BUSY

For example, one of the ways in which online providers choose to subsidise their ‘headline’ deals is by taking on high volumes of work, with teams of case handlers being supervised, in the majority of cases, by a single solicitor or conveyancer.

Which means that wherever complex or unexpected issues arise (which, let’s face it, probably accounts for around 70% of all cases!), supervisors are often too busy to attend to problems quickly or efficiently, thereby leading to lengthy delays and the chance of mistakes. Moreover, an emphasis on centralised call centres to answer client queries means that customers will often speak to a different person every time they ring through, with instances of long waiting periods or low levels of knowledge amongst staff members merely adding to their woes.

And, while low fees are often regarded as the overriding incentive for using online providers, the presence of extra or hidden charges can eat into

MORTGAGE INTRODUCER FEBRUARY 2020

these savings quite alarmingly. Indeed, according to the recent IRN Research report, almost a quarter (or 23%) of clients reported ‘fixed fee’ charges that were higher than their original quote, with search fees or leasehold supplements (for example) often languishing in small print obscurity- a significant detail.

PRICE AND QUALITY

So, in summation, what we are left with is a level of service with no single point of contact, little in the way of expert supervision, difficulty in contacting staff members with the training or knowledge to resolve issues quickly (if at all) and savings which, when all of the above is taken into account, are marginal. Because, in short, no one in their right mind has ever suggested that using price as an indicator of choice is a guarantee of quality.

And, with so many variances in terms of customer circumstance, property and title, as well as a marked growth in the number of complex cases (which are already helping to push completion periods to new limits), any format which reduces conveyancing to a mere ‘process’ or which dispenses with the need for human experience and know how to confront issues and push cases forward is likely to invite longer holdups and more mistakes.

By contrast however, local conveyancing providers offer a bespoke and personalised service that is responsive to local market conditions and the needs of clients, while prioritising the resolution of queries, issues and delays in a manner which is speedy and efficient (as opposed to being shovelled onto an existing backlog). There is an argument for providers to be more open about the quality and speed of service that they deliver upfront, so that clients can make more informed decisions. Ultimately, the conveyancing process is too important to trust to empty promises.

And, while technology can help to manage resource capacity and volumes, it is only part of the macro mortgage landscape regarding connectivity and integration.

It is no panacea for the issues encountered on a day-to-day basis. M I www.mortgageintroducer.com

REVIEW

CONVEYANCING

Have you seen the Boris Bounce?

Mark Snape managing director, Broker Conveyancing

O

ver a month into the new year, how has it been for you? While there is still plenty of water to flow under the bridge over the course of the next 11 or so months, the UK did finally leave the EU on 31 January – an outcome that had seemed somewhat unlikely over the course of the past three and a half years, but which has now happened.

It’s difficult not to look at this without some sort of ‘Remain’ or ‘Leave’ hat on, and with trade negotiations to take place throughout the rest of 2020 there is still a degree of uncertainty about what deal we will achieve; however in some sense we have an outcome.

And, as mentioned, we have seemed very far from this in recent times.

Whether it turns out to be the success that many Leavers believe it to be, remains to be seen but it’s happened/ happening and, in that sense, I agree that we have to make the best of it.

Turning attentions to the housing and mortgage market, has your business seen any sort of ‘Boris Bounce’? From conversations I’ve had with others active in the market, and indeed with our agent and advisery clients, there does appear to be a much larger degree of positivity around the market in recent weeks.

Its been quite obvious for some time that many potential purchasers and sellers have been hanging on to find out what might happen re: Brexit, before doing anything major like buying or selling a house. And, quite frankly, who can blame them?

The market has, of course, ticked over – especially in purchasing – because there will always be a base number of homeowners who have to buy and sell, but those who have not

www.mortgageintroducer.com

been time-sensitive have tended to hold back.

I now get the sense, particularly from agents, that this attitude is thawing, and certainly since the start of the year there appears to have been a growing number of homes coming onto agents’ books, and a growing willingness to put down offers and the like.

“Advisers may well need to think about how they are maximising the advice they can provide to every single client” Similarly, although it’s obviously a somewhat different market, remortgage activity is also steady, as those who come to the end of their deals look to refinance or perhaps product transfer in order to secure a decent rate.

Again, in that sense, it’s good news for consumers with rates – especially for those with larger levels of equity – very low, and (as I write) there’s an anticipation that these could drop even further.

RATES AND CHOICE

One wonders, if this does play out, how borrowers (and their advisers) might well look at the rates/product choice on offer, especially when it comes to the term?

Its been quite apparent for some time that we’ve seen a growing popularity in 5-year fixes, indeed the latest Moneyfacts UK Mortgage Trends report in January showed just what a shift we’ve seen.

Back in January it said that there were over 600 5-year fixed rate mortgages on offer, compared to 592 2-year; that’s a significant change, especially when you consider that five years ago, 2-year deals outnumbered their five-year counterparts by 148, and last year, they were in the ascendency by 17. So, we can see there has been a growing move towards five-year fixes

in recent years, perhaps fuelled by the economic uncertainty around Brexit and a desire by borrowers to secure a good rate for a longer-term in order to ride out any potential difficulties that might be coming.

It will now be interesting to see if this continues to be the trend.

Rate drops are likely to be good for both those who want 2- and 5-year deals, but undoubtedly the very cheapest rates will be over the shorterterm, and from an advisory perspective it means that clients can be refinanced in 24 months rather than 60.

Indeed, there has been some disquiet in the advisory space about the increase in 5-year product popularity, because this means less transactional income over the period, and of course it may mean you don’t get to see your client as much as you would like over a 5-year term.

Although, it has to be said, that advisers who are waiting that long to contact clients and are not keeping in regular communication with them - regardless of when their deal runs out - should really be reviewing their marketing strategies and their dealings with existing clients.

But it’s the case that instead of getting two lots of procuration fee income over a 5-year period, advisers would just have the one.

Which may potentially leave an income gap, especially if more and more clients have been seeking and taking 5-year products, and if this continues in the future. More product choice/more competitive rates in the 5-year space could make this more likely.

Plus, of course, we can’t discount the greater numbers of product transfers, a focus on execution-only, and direct-to-consumer marketing being ramped up.

In such a market, advisers may well need to think about how they are maximising the advice they can provide to every single client, especially if they’re not going to be writing their next mortgage for another five years. M I

FEBRUARY 2020 MORTGAGE INTRODUCER

43

REVIEW

EDUCATION

What’s in a name?

Michael Nicholls relationship manager, LIBF

T

itles and designations: for many of us they’re important signifiers of what we’ve achieved, the knowledge we’ve built and the level of professionalism we work to.

In the financial advice and wealth management space, the ultimate goal for many is to become chartered.

After all, chartered status shows your customers and colleagues that you’re highly qualified, experienced and committed to the highest professional and ethical standards. There are other titles too, like certified and certificated, which show that you’ve reached a certain level in your career and are competent and qualified.

Of course, chartered status doesn’t exist in the mortgage world. The most important designation for us is CeMAP. But what if, when you become CeMAP qualified, you became known as a “competent adviser”?

Would there be any benefit in being known as “regulated”, “certified” or even “chartered”?

All these words imbue respectability.

And it’s possible that we’d create more confidence and instil more professionalism if we had more descriptive titles to match the professional qualifications we earn in our industry. But would they really help our customers?

TRUST

People want to know that advisers are reliable, that they’re going to follow up and do a good job, and that’s why – as with traders like plumbers, electricians and decorators – there’s a growing demand for websites and forums offering recommendations and reviews.

Take unbiased.co.uk, a free-to-use web service that connects consumers to financial and legal advisers, including

44

independent financial advisers and mortgage brokers. Unbiased is said to be the website that consumers use more than any other to find advisers, as well as other professionals such as accountants and solicitors. With its clear navigation and consumer friendly design, it’s no wonder.

The Financial Conduct Authority (FCA) has also been taking steps to help consumers make better decisions when appointing financial and mortgage advisers.

Its Financial Services Register was launched in 2015 to enable consumers to find out whether a firm “is authorised” by the Prudential Regulation Authority (PRA) or FCA. Consumers can search the register to find information on key individuals working in financial services.

More recently, a new Directory of Financial Services Workers was launched to enable customers and others to check the identity of an individual adviser and find suitably qualified individuals for the service they require. Firms can also crosscheck references as well as make their staff known to potential customers.

CUSTOMER PRIORITIES

There’s no doubt these web services are useful tools for ensuring consumers can find suitably qualified and reputable advisers, but is that enough?

As a practicing mortgage adviser, I was seldom asked about the exams I’d done or the qualifications I obtained.

Many customers came to me through recommendations because of the quality of my work, not because I was qualified. (this was a given). A level of trust between adviser and client is essential.

So, what are customers really looking for in a mortgage adviser, when they think about trust? What does it mean to be reliable and competent adviser?

To be qualified, yes, but we’re all qualified. The question is what marks you out as a better mortgage adviser than a competitor down the road.

The answer is continued professional

MORTGAGE INTRODUCER FEBRUARY 2020

development (CPD), in that, many mortgage advisers keep up to date with the latest products and developments in the market, others don’t. Some are aware of the impact of the wider economy, others not so much. Some would benefit from more support and guidance with CPD to fit it in with their busy roles.

“Many mortgage advisers keep up to date with the latest products and developments in the market, others don’t” CPD has never been an FCA requirement for mortgage advisers, and that puts the onus on us to take the initiative and to upskill – to make ourselves more professional in the absence of a requirement to do it.

Managing and carrying out CPD is much easier now, especially as it’s flexible and likely to include what most good mortgage advisers are already doing in one form or another. That is, attending seminars and workshops; studying for a relevant qualification; listening to podcasts; attending webinars; e-learning; even watching CeMAP TV. By completing only 15 hours of CPD every year – that’s just over an hour a month – an adviser can demonstrate that they have a professional edge with a ‘CeMAP Professional’ digital badge on LinkedIn, and the logo proudly displayed on their company website and email signature.

Their details will be stored in the online Professional Services CPD register at The London Institute of Banking & Finances – another resource the public use. They can display ‘CeMAP Professional’ credentials in their office and add new letters after their name.

Most importantly, they can reassure the customers – who come to them for help with one of the most important financial transactions they’ll ever make – that they’re in safe hands. M I www.mortgageintroducer.com

For intermediary eyes only

FINANCIAL ADVISER SERVICE AWARDS

FIVE STARS, SAYS MONEYFACTS

THIS MAN IS ON A MISSION AND WE’RE BACKING HIM

You’re no ordinary intermediary: you’re on a mission to deliver to your clients a better retirement. That’s why we’re dedicated to providing you with the highest level of support, cutting edge technology and the widest range of lifetime mortgages.

While you’re working hard for your clients, we’ll be working hard for you.

for advisers on a mission

more2life.co.uk

| 03454 500 151

THE OUTLAW

THE MONTH THAT WAS

THE

Every month The Outlaw draws some tongue-in-cheek parallels between society at large and a mortgage market in flux

THE THE

AND THE

E

ver had that rueful feeling? You know... the one where you wanted to punt on a hunch about something unexpected occurring. You didn’t get the bet on. And then the horse, car, team, or in this case the politician actually surprises us all and you’re left holding a 33/1 betting slip that you didn’t get stamped in time?

I had bloody two of those this month; the first was Miguel Sard moving on from Santander and the second was Sajid Javid resigning [sic], getting the boot). More on the Spanish maestro in a moment.

But firstly, to the dysfunctional dynamic in Downing Street between residences No 10 and No 11.

You know, for the life of me, I have never understood why historically the bloke at No 11 should ever have such ridiculous levels of autonomy and discretion.

A Chancellor rarely wins a political party the General Election. Nor is he ever a bloke with much charisma or personality and some don’t even have a firm grasp of algorithms or Miguel Sard: Adios

46

MORTGAGE INTRODUCE

macro-economics (hence they are propped up by over-promoted and unelected Treasury flunkeys).

And In fact quite often he’s just a total pain in the a*** (witness Gordon Brown, George Osborne and Phillip Hammond of late). So well done Boris and Cummings; enough. You two won the election; and with a handsome majority too. So you get to pay the piper and to also call the tune. Javid was a twiceexposed flip-flopping remainer, and the consummate example of the Peter principle - he’d ascended to his position of incompetence and vulnerability.

Back to Miguel Sard. Who unlike the aforementioned Chancellors, is actually a fella who has combined a buccaneering and conquistadorpersonality with a granular grasp of numbers. When the news broke it was a surprise to many.

But to borrow a footballing metaphor, this was like Ronaldo leaving Madrid... where after countless years you had to ask, just how much more could actually have been achieved, especially within a context of tightening cost controls and an ever-greater emphasis on pruning the lender’s cost-income ratio.

Sard ‘s move to RBS is great news for RBS, but for brokers it’s an irritable curate’s egg isn’t it? NatWest is possibly the only lender which has been besting Santander on a balanced scorecard this past five years. I can think of six other lenders that needed Sard more. So it’s a bit like your missus’ best-looking girlfriend moving in with you...

Two things are guaranteed in this move. First, NatWest’s continued dominance will be assured (and we hope that Miguel the digi-warrior won’t change too much). And second, Sard and his acting replacement (Brad Fordham) will likely see their weekday golf handicaps go in opposite directions these next few months. Anyway, Buena Suerte, Miguel y Brad...

It was a month when several others moved on. Outlaw won’t miss the outgoing BOE gaffer and ‘’unreliable boyfriend’’, Mark Carney. A defeated and slightly narcissistic remoaner, it was insightful reading at the weekend when Sir Mervyn King trashed Carney’ s ill-thought out Forward Guidance strategy.

And the sad and needless death of Caroline Flack demonstrated once again that the onset of reality TV and the subsequent craving of so many young

people for more than 15 minutes of ‘fame’ has actually been the country’s foremost cultural, intellectual and social regression this past 20 years.

Amid all this, there remains plenty of good news and optimism around.

The Budget will doubtless bring more detail, but the First Homes initiative could prove to finally be the near-silver bullet approach that’s been needed to ‘’level up’’ the country’s regional housing injustices.

We also had record employment figures announced which appeared to validate the whole Brexit narrative regarding our economy and what you may once recall was the din of Project Fear re our economy.... unemployment is now 40% higher in many EU countries than it is here!

January’s M&A activity was also healthy with the likes of Quilter and Unbiased getting deals away and IMLA forecasted that the mortgage market would grow to £268bn this year.

Further, did you know also that first-time buyers are now at their highest level since 2007 (there were 353,000 such buyers last year... there were 357,000 in the last year before the 2008 crisis). Other highlights include Halifax raising their proc fees in places and each of Interbay and Shawbrook starting the year with some marquee lending deals.

A final commendation, and as tiresome as it might read, goes to NatWest who continue to astound brokers with their all-round consistency and especially their support for borrowers who may only have RBS: Farewell to feckless Fred a modest deposit or indeed a modest income.

The re-brand away from the RBS brand name (and those still painful recollections of how the feckless Fred Goodwin lumbered us taxpayers with a £46bn bail-out package) makes good sense.

There are numerous senior account managers throughout the intermediary sector doing fine work, but in the opinion of this writer, none are presently surpassing the work of Luke Christodoulides at NatWest.

Less than helpful however has been the FCA, which continues to drag its leaden feet on the matter of mortgage prisoners. Just what is bloody keeping them?

Also receiving opprobrium was TSB, who in this age of “woke-ism” have been accused of shunning older “asset-rich greys” in favour of younger more aspirational clients.

“Woke-ism”. Sadly it’s now the defining word of the decade, and Sajid Javid: Cheerio

www.mortgageintroducer.com

FCA: “Turds and Floaters”

for those who’ve been living in a cave this past five years it speaks to “being alert to injustices in society, especially around race, religion, or gender”. What a load of old self-serving bollox this has become.

Witnessed no more blatantly than at the vainglorious and now largely irrelevant Oscars ceremony where the likes of Joaquin Phoenix and Brad Pitt sullied their acceptance speeches with totally superfluous references to ‘ victims ‘ in wider life. I mean... as if most actors give a sh*t anyway, beyond where the limo is going to pick them up later, and who’s got Columbia’s leading export sorted for them.

And so we enter the wonderful month described

by Dickens as “summer in the light and winter in the shade”, March. Having failed to capitalise on my hunches in January and February, I’ll be going large on the following in March: 1. Cheltenham; The Irish to train 20 winners (they craftily prepare and race their fancies in discreet and distant Irish pastures and then rock up with winning outsiders!)

2. Real Madrid to expose Oilchester Citeh (and their supposed genius, Pep!) as being defensively both neglectful and negligent. Almost 1.5bn squid, much of it allegedly outside the FFL rules... and they don’t have a single decent defender.

3. The Budget to see Boris and Cummings taxing certain strands of the Tory voting classes in order to “level up” the playing field in the Midlands and North. And not before time. It’s easy. Look after the new blue wall and it’s a 10 year stint for Bojo.

And finally, the FCA to do absolutely NOTHING about the 136 companies recently referred to it for being potential cases of “phoenixing”. Let’s be candid about this, if it can’t police its own Canary Wharf building where disgruntled staff are leaving turds and floaters laying around, how is it going to clear up the unashamed sh*tshow that has been called phoenixing?

I’ll be seeing you... M I FEBRUARY 2020 MORTGAGE INTRODUCER

47

COMMENT

THE BIGGER ISSUE

How could the First Homes scheme help Generation Rent?

Martijn van der Heijden

John Phillips

chief strategy officer, Habito

national operations director, Just Mortgages

T

I

CONSEQUENCES But, the scheme could have knock-on consequences on the development of other forms of affordable housing if as has been mooted, it’s paid for by forming part of developers’ section 106 affordable housing requirements. This could lead to a fall in the supply of ‘affordable’ homes, and increase house-prices for those who are in ’Generation Rent’ but don’t neatly fit into the First Homes scheme’s eligibility criteria which has yet to be fully laid out.

It’s clear the government is looking at multiple ways of solving the homeownership crisis. Their election manifesto pledge promised an extension of the Help to Buy schemeand a reform of shared ownership.

Boris Johnson is also reportedly looking at making lifetime fixed mortgages available which would protect customers and make mortgages more affordable and slashing the cost of deposits. M I

RINGFENCED There could be all sorts of problems in deciding who is and is not eligible for the discount. It might start off being tightly ringfenced, but it won’t be long until some other deserving group asks why they are not included. If you are a nurse in a private care home or charitable hospice, will you be treated the same way as one in the local hospital? Will special constables have the same rights as serving police officers? I could go on.

Additionally if the proposal is to make discounted homes available to local people, who qualifies as local? Will that be based on length of residency? Place of birth? Schooling? And how will that affect labour mobility? I don’t see this sort of discussion ending well.

Most of all, though, it does nothing to tackle the underlying fundamentals – the mismatch between demand and supply that has grown as housebuilding has faltered, and the fact that so much of our existing stock is misallocated.

A lot of this is down to market distortions such as the exorbitant rate of Stamp Duty on higher-value homes. This acts as a huge deterrent to moving, and results in people staying in properties that are no longer suitable for their needs. The Chancellor should do something to address that issue as well. M I

he government’s First Homes initiative - a proposed scheme to cut a third off the cost of a proportion of new homes for first-time buyers as announced on Friday, is very welcome news.

The proposals, which would focus on key public sector workers and veterans buying locally, aim to provide support for those priced out of an ever-more expensive housing market. Achieving the government’s proposed minimum discount of 30%, could result in eligible first-time buyers saving an average of £100,000 - a hugely meaningful sum.

The impact this would have on the market is as yet unexplored and something the consultation process will look to cover. However, given it’s been suggested that there is either a national or regional cap on the values of properties used under the scheme, Boris Johnson would effectively set some house prices - a highly unusual move for a Conservative leader. The Conservatives’ have specified that the scheme is not to be used to subsidise the purchase of exceptionally expensive property - likely referencing criticism of Help to Buy as merely boosting builders’ profits.

48

MORTGAGE INTRODUCER FEBRUARY 2020

t seems that every new government has a different scheme to try and help out first-time buyers. We’ve seen a series of initiatives aimed at helping young, and even not-so-young, people get on the property ladder. If they had worked, presumably we wouldn’t still be talking about it.

Take Help to Buy. I’ve tended to the view that it’s good as far as it goes.

The problem is that it helps a limited number of people, many of whom may have been able to afford to buy anyway, and does very little to help the rest of the market.

My fear is that the proposal for a 30% new homes discount for certain categories of people will be more of the same.

?? ??? ?

Our experts discuss the government’s First Homes scheme and how it could help the growing renting population

Kate Davies

Paul Adams

executive director, IMLA

sales director Pepper Money

T

T

MOVING ON There are also question marks around whether, having bought a first property under the First Homes scheme, a borrower would be able to trade up and move to a larger home. If the First Home is, by definition, designed to be a starter home for a first-time buyer.

It’s possible, therefore, that some borrowers could find it difficult to move on from their First Home properties, as they would need to rely on high loanto-value products to secure finance in order to move.

Ultimately, the ability of the First Homes initiative to help more first timers onto the ladder is yet to be understood. It is also worth considering to what extent higher house prices are preventing first-time buyers from buying.

From HS2 to the ‘Boris Bridge’, this new government seems set on using its current majority to pursue ‘big thinking’ policies, but what we really need to see is a more serious, long-term plan which brings us closer to solving the current issues in the housing market – especially in the context of the current housing supply. M I

PROGRESSIVE In addition, it would be a progressive step for the government to look at some of the other issues that are facing Generation Rent, such are the availability of good quality, well-priced accommodation in the private rental sector.

Demand from tenants is outstripping supply of property from landlords, and it could be ultimately beneficial to tenants, who are saving for a deposit, for this imbalance to be rectified through new policies and measures to encourage the availability of good buy-to-let property, rather than to constrict it. M I

he government’s First Homes scheme is an interesting idea in principle and could have the potential to increase the numbers of firsttime buyers accessing affordable housing in the UK. However, it’s important to remember that the scheme is still at the consultation stage and its success will depend on the feedback the government gets from those who will actually be driving and delivering on its proposals.

The government is not actually putting any money into the scheme – it is asking planning authorities and developers to work together to build properties that will then be sold at a discount to borrowers who qualify according to the scheme’s criteria.

The government has indicated it might consider legislative options to bolster the scheme, but it’s not clear what those measures might be. The legislative timetable tends to move pretty slowly.

www.mortgageintroducer.com

he First Homes scheme looks like another step in the right direction in terms of government support for first-time buyers, but the reality is that this is another scheme that is entirely focused on new homes, which only account for a small proportion of total housing stock. So, the overall impact of this scheme in helping the plight of Generation Rent is perhaps limited.

The good news for potential first-time buyers is that the mortgage market is an increasingly competitive environment, with lenders constantly introducing new propositions and criteria to help to provide solutions for the increasingly diverse range of circumstances facing borrowers.

This broad range of options are available on government schemes as well as on properties and for buyers who are not eligible for government assistance.

Furthermore increased market competition is creating better choices on rate and LTV. Many of these options, that will help a broad range of people take their first step onto the housing ladder, are only available through intermediaries and so many customers may be unaware of the potential they have to buy their first home.

So, it would be good to see investment in promoting the benefits of professional financial advice to make the most of the opportunity that is already available to first-time buyers.

FEBRUARY 2020 MORTGAGE INTRODUCER

49

INTERVIEW

LOANS WAREHOUSE

The future of loans Loans Warehouse co-founders Matt Tristram and Sam Busfield discuss all things loans with Mortgage Introducer, including the importance of technology and plans for 2020

T

here has been a lot of noise on the rise of technology in the broker market. However, questions remain when it comes to how much business these so-called ‘digi-brokers’ actually write. As with anything, it’s easy to talk the talk but far less easy to actually walk the walk.

As an industry, we have watched as these ‘tech disruptors’ try and change the mortgage market with their Shoreditch start-up ways.

But this technological revolution needs to be driven by those who know the market best. The lenders, the brokers, the packagers - those who are actually on the ground.

And whilst this revolution may not be televised, we certainly can write about it. We caught up with Loans Warehouse co-founders Matt Tristram and Sam Busfield to find out why, after years of telling people that the seconds market isn’t fintech, they are now looking at a future with tech at the core of their business.

TECH VS SECONDS The debate surrounding the role of technology is one as old as time. There have been differing views about its effectiveness and involvement in day-to-day practice for years.

For the duo at Loans Warehouse, it was no different.

Whilst they were open to integrating technology into

50

MORTGAGE INTRODUCER

FEBRUARY 2020

Matt Tristram and Sam Busfield

www.mortgageintroducer.com

INTERVIEW

LOANS WAREHOUSE their business they were aware of its limitations.

“Second charge is not fintech,” could have been a motto for Busfield and Tristram. Tech was an add-on to the business but not necessarily a way of doing business.

It makes sense. The pair, who are now taking Loans Warehouse into its 15th year of operations, have always pushed the fact that second charges aren’t one size fits all – and they aren’t wrong.

Seconds are sometimes “square pegs that have to fit in round holes,” as Tristram says.

With that in mind it seems unlikely that an algorithm will be created anytime soon that could replace the brokers role in the second charge or bridging finance – one of the firm’s other key offerings – processes.

GETTING PERSONAL However that all changed back in 2019. At that stage, Loans Warehouse was a minnow in the personal loans space. What Busfield describes the firm as a “small player”.

Traditionally Loans Warehouse was seen as a second charge business with mortgage and bridging operations.

Tristram even goes as far as saying that due to the size of the personal loans side of the business it was “unrewarding”.

“Lenders were changing their criteria or tightening up their lending models and we wouldn’t know about it,” he adds.

But that was all about to change. Rather than call it a bad job the pair decided they were not going to be beat and set about revamping their offering.

“We looked extensively at what other firms were doing in the personal loan space,” says Tristram. “We looked at how they made decisions and what was required to reach those decisions.

“It was then that we decided we would go down the route of building an end-to-end online journey.”

And whilst Loans Warehouse wasn’t the first to build such a proposition Tristram and Busfield were both confident that their experience would allow them to improve on what was already out there.

As Tristram says: “When we looked at what was out there we knew that we could do it better”.

GETTING IT DONE Having decided to take the plunge into a fully tech enabled online offering, the guys didn’t waste any time.

It was early February when Loans Warehouse started building out its new personal loan proposition.

“By mid-April we had a working online personal loan form with nine lenders,” says Tristram.

But it wasn’t just the people who were coming in and completing the online application process that were potentially customers.

Tristram adds: “We realised the opportunity it created.

It didn’t just create an opportunity for applications we were already getting; the new technology was → www.mortgageintroducer.com

FEBRUARY 2020

MORTGAGE INTRODUCER

51

INTERVIEW

LOANS WAREHOUSE opening doors that had always been shut before.”

Following this initial launch, their attention turned to aggregator sites and they soon realised that they had more capabilities with their tech offering.

“We soon realised that could power the aggregator sites,” Tristram explains. “They have the same problem as everyone else does – they don’t have enough tech time.

“What we have built is initially an API - you can take the API and put it onto any website and they just have to build the front-end.”

Remember the problem though, no-one has tech time so, the duo have also moved into white labelled personal loan propositions for other brokerages.

“Providing that brokers have the right regulatory permissions they can have a branded page on their website within 24 hours,” says Busfield.

ROBO-BROKER? But the tech upgrades must have had an impact on Loans Warehouse? Are the changes seeing the firm become a tech focussed, faceless automaton?

Three quarters of the Loans Warehouse personal loan team is now centred around getting the tech proposition right.

But Tristram is quick to respond. “Despite the tech improvements we are still a traditional brokerage. We make a point of talking to people if it will help them with their journey or decision” he says.

He points to a couple of examples on this. One being how Loans Warehouse monitors drop offs. Personal loans advisers watch every application and phone the potential borrower to make sure everything is as it should be.

Another example is the work that Loans Warehouse does with potential borrowers on guarantor loans.

As Tristram says: “If you have not had a guarantor loan before you need explaining what they are.

“We try to educate on what a good guarantor loan is. If someone wants to ask for financial help, we want to make sure that they only have to ask one person.”

THE ROLE OF PEOPLE Whilst technology is now a key focus at the business, Tristram is clear that there is a balance to be cut between tech and experienced staff.

“Technology is great, but you have to be honest about what it does,” he says. “I don’t think we’ll ever have a business that is purely online.

“We will always have people at Loans Warehouse.”

The role that people play in the business is clear.

Loans Warehouse is a regular winner at industry awards.

Indeed it has achieved numerous accolades at both the Mortgage Introducer and Specialist Finance Introducer awards.

“What do you win awards for in secured loans?” asks Tristram. “We are a broker, we all have the same lenders, we are not the biggest but yet we get the most

52

MORTGAGE INTRODUCER FEBRUARY 2020

votes because our customer service is consistently so good that someone doesn’t mind taking a minute to vote for us.

“At the end of the day we find the best solution for the customer and the customer walks away happy.”

MAINTAINING THE DYNAMICS With all these changes happening at the business, it wouldn’t be wrong to think that maintaining the company ethos is difficult.

Having been running for 15 years, Loans Warehouse has a very distinct feel to it. You may have already been to one of their popular events such as their second charge festival (#LoanFest) or their rave!

But as much as there is a family feel, there is a serious business-like steely focus sitting under the surface.

“Work hard, play hard” is apt when it comes to the firm.

To help give new starters a grounding in both the ethos of Loans Warehouse and the fundamentals of its offering whilst supporting the existing team, the business has brought in Zoe Koon as head of training and development.

Not one of our sales team came to us qualified, we trained them all. Our completions team is the same – only one person in our team had previous experience Tristram is quick to praise Koon for the impact she has had on the business.

“Zoe came into the business and within two months we had a training environment, the envy of the second charge industry,” Tristram says.

“This entails someone coming into the business and spending eight days in a classroom environment.

“We’ve now started recruiting in small groups of five or six and putting them through an intensive programme to gain an understanding of the business, their products and the industry as a whole.

“We want them to really understand what it means to work for Loans Warehouse.”

As part of the training, new recruits begin as paraplanners to be taught good habits on the phone and are then given the chance to become advisers with CeMAP training paid for by the company.

Tristram says that this has been popular. “We probably have around half of our staff who started as paraplanners and now work in other areas of the business as CeMAP qualified advisers,” he says.

“Not one of our sales team came to us qualified, we trained them all. Our completions team is the same – only one person in our team had previous industry experience.

“The idea is staff retention – we don’t want people to leave – but if they do, they do so with a higher skill level. It is not just about the product; it is about the forgotten art of customer services.”

When looking at a new CV, what attracts the eyes of www.mortgageintroducer.com

INTERVIEW

LOANS WAREHOUSE the dynamic duo? “There has to be a level of education with any new recruit and we look for that when hiring,” Tristram says.

“Passing a CeMAP exam is difficult. It is not the be all and end all, but it becomes a factor whereas before it never was.”

Busfield agrees with the importance of having an educational foundation. “When looking at someone’s CV, we look at how the candidate got on with both English and Maths because we know that those are two big parts of what they will be doing – they need to have a decent base level that we can build onto.”

WHAT NEXT? Where 2019 was all about onboarding lenders to the new Loans Warehouse personal loans system and ensuring that the technology worked, what are their goals for 2020?

“We aim to start a panel of personal loan lenders with over 20 members which will include some of the most well-known names in the lending market.”

Tristram says.

Following a 1,500% increase in completions following the changes the team implemented last year, Tristram and Busfield aren’t happy to just rest on their laurels.

“It wasn’t an easy door to open,” Tristram adds. “We had to educate the big names on what we were trying to do.

“Now that we have the right systems in place we are keen to push on. An increase of 1,500% last year was great but we plan to go off the scale this year.

“There are so many opportunities with personal loans and it opens up the door for other products.”

It’s an interesting thought. The opportunities that abound when technology such as this is employed in the right way are most easily applied to the products with very linear processing.

However, could this be how technology will eventually be rolled out in more complex product areas? Led by experienced hands who have a pedigree in the sector in which they are trying to innovate, rather than becoming tech-focussed and trying to ‘disrupt’ something they don’t quite understand?

It’s possible. Maybe the next generation of financial services tech is more likely to come out of somewhere like Watford than it is Silicon Valley or Shoreditch.

For Loans Warehouse, a successful 2019 has created the foundations for an even more successful 2020.

Technology remains a priority at the business, with exciting innovations ahead.

Both Tristram and Busfield are striving for Loans Warehouse to be a market leader that can show the opportunities which technology can bring to the sector.

Time will tell if they will join the cadre of people who have brought tech to the mortgage masses.

But one thing is for sure. The future looks bright. M I www.mortgageintroducer.com

MI

FEBRUARY 2020 MORTGAGE INTRODUCER

53

LOAN INTRODUCER

INTERVIEW

Snakes and ladders Natalie Thomas talks to Stephen Lawrence, group national sales manager at the Norton Group, about his thoughts on the second charge sector

S

tephen Lawrence, group national sales manager at the Norton Group, is one of the second charge industry’s most distinguishable figures and not just because of his tan!

Having worked within the finance and banking industry for over 30 years, Lawrence has witnessed first-hand many of the second charge sector’s highs and lows.

Loan Introducer caught up with Lawrence to discuss why he thinks the sector is currently in its happy place and why it could be on track to hit £2bn this year.

Norton is one of the longest established second charge brokerages in the sector. Is the market in a good position compared to where it has been historically?

Yes. Since March 2016 and The Mortgage Credit Directive, the second charge process and in particular, the income and expenditure calculation have mirrored the first-charge mortgage market from a compliance perspective. Linked to that there are now second charge rates below 3%, fixed rates up to 10 years, lending terms up to 35 years, LTV amounts up to 100% and some products with no early repayment charges.

These are excellent second charge terms for homeowners and it is our belief that after 47 years in finance the Norton Finance Group will continue to grow and prosper for another half century.

Has the sector peaked in terms of lending volumes?

No. The second charge market is in a very healthy position having seen business volumes steadily increase in each 2019 quarter. Five, 10 and 15-year fixed rate first charge mortgages are becoming ever more popular with homeowners and remortgaging may not be an option for some of these borrowers due

54

MORTGAGE INTRODUCER

FEBRUARY 2020

Stephen Lawrence

www.mortgageintroducer.com

Making it personal Is there something about yourself that people would be surprised to hear?

I walk on average 10,000 steps every day and have done for the past four years.

When you were young, what job did you aspire to as an adult?

I wanted to join the army as an officer.

What is the best bit of advice you have ever been given?

Life is like the game snakes and ladders. When you go down a snake pick yourself up and focus on life’s positives and you will soon be back on track and going up a ladder.

What is your most prized possession (aside from family)?

A tan - after my four holidays to the Canaries every year!

to early repayment charges, with a second charge being considered instead. As a result of this, I believe the second charge sector will see steady growth over the next few years both from aggregators and intermediary sources and I predict lending of £2bn in 2020.

What are some of the issues holding the second charge market back?

Quite simply intermediaries not embracing second charge products as a homeowner loan option. If I had a pound for every intermediary who said, ‘I don’t have clients who need a second charge product’, I would be a billionaire by now.

What will 2020 bring for the second charge market/what would you like it to bring?

2020 will bring increased volumes of second charge completions and more satisfied homeowners. My wish would be that intermediaries who have never considered a second charge product embrace this loan option and deliver a marketing strategy to their client bank. Why this strategy? Because at your peril, if you do not implement this marketing initiative some of your homeowner clients will go on to an aggregator website and obtain second charge finance for many different loan options and could be lost forever.

From a company perspective, what will you be busy with in 2020?

Norton Finance will continue to sell the message to the intermediary marketplace that when providing advice a second charge product should be considered and may be the most suitable loan option for their client. M I www.mortgageintroducer.com

FEBRUARY 2020

MORTGAGE INTRODUCER

55

LOAN INTRODUCER

SECOND OPINION

Demand for second c Natalie Thomas asks our experts if the second charge buy-to-let market is finally seeing an uptick in business

R

egulatory upheaval, tax changes and increased tenant legislation have all put a strain on both landlords and lenders in the buy-to-let (BTL) market.

Many of the BTL products that were commonplace just a few years ago no longer exist – meaning landlords are increasingly having to look elsewhere when it comes to financing their property empires.

Just as elsewhere in the first-charge market, second charges can offer an alternative for BTL borrowers who are unable to raise funds through their existing lender or who may be in limbo due to their previous lender or product ceasing to exist.

While the second-charge market is not widely known for its BTL offerings, this could be about to change with rumblings afoot that second-charge lenders who aren’t currently in the space are looking to make their move.

So, Loan Introducer asks:“Are you seeing an uptake in demand for second charge buy-to-lets?”

Jeffrey List director, Specialist Money

We have seen a slight increase in the number of landlords approaching us for second charges to be secured against their BTL properties.

This is usually in circumstances where the landlord is looking to raise funds to expand their property portfolio. In the main a second charge is being sought due to the fact that the existing first charge mortgage secured against the BTL property is on a 5-year fixed rate and would have early repayment charges if the client were to exit. Such fees can be as high as 4% or 5% if the funds are being requested in the early years of the fixed rate mortgage.

56

Richard Tugwell group intermediary relationship director, Together;

We saw a slight rise in applications for second charge BTL mortgages, year-on-year between 2018 and 2019. Second charge BTL mortgages can be used for several reasons and can sometimes be quicker than a remortgage.

For example, a customer may have an existing low-rate mortgage and require additional equity, or they may want to release some money from an existing portfolio for further purchases or property maintenance.

They may want to unlock equity and pay back over a shorter term than remortgaging the whole amount, which may save money in the long run. A borrower could also have early release charges on their current mortgage which they would not need to pay if they took out a second charge.

We had a customer who needed to unlock some equity from their BTL empire to buy more rental properties - but they did not want to lose the favourable rates on their first charge BTL mortgages by remortgaging.

We were able to agree a £879,000 second charge BTL mortgage secured against 26 properties in their £3.5m portfolio, meaning they could press ahead quickly with their plans to buy more rental properties.

Steve Walker managing director, Promise Solutions

We can’t say we have seen any increase in our BTL second charges enquiries overall.

However, the mix of enquiries we are seeing

MORTGAGE INTRODUCER FEBRUARY 2020

has changed slightly and as well as seeing more enquiries from members of the armed forces, we are also seeing more queries about holiday lets and Airbnb’s which might suggest that while enquiries from the more traditional BTL landlords have reduced, investors’ scope has shifted.

Greg Cunnington director of lender relationships and new homes, Alexander Hall

We have not seen a rise in demand for this type of lending. BTL as a whole has remained strong as the market evolves but the various first charge options that are on the market cater for most scenarios, with top slicing and lower rental income requirements on 5-year fixed rates or for lower rate tax payers helping here.

Jo Breeden managing director, Crystal Specialist Finance

Yes, we are seeing increased demand for second charges on BTL properties. It’s still a limited market compared to the residential space, however more lenders are getting involved which in turn will raise its profile in the marketplace. It is widely acknowledged that the purchase market is relatively flat in the UK and this, combined with the recent changes to Prudential Regulation Authority (PRA) borrowing rules, means that landlords are looking for ways to release capital and continue to expand their property portfolios.

With LTVs available up to 85% for second charge BTLs, it is another valuable tool for brokers to discuss with their clients. www.mortgageintroducer.com

LOAN INTRODUCER

SECOND OPINION

charge buy-to-lets Matt Cottle chief executive officer, Specialist Mortgage Group

We always see an uplift in BTL second charge queries at the beginning of the year as landlords look to raise fast capital to increase portfolio size without disturbing their current mortgage arrangements. The market is well catered for by the current lenders. Rates are very fair and there is a good range of products that cater for most needs.

New products form new lenders are always welcome however as it creates increased competition and prevents things getting stale.

current portfolio with a view to purchasing additional investment properties. I have recent examples where I have been able to use a portfolio product as the client did not have the equity level in an individual property to raise the deposit they needed. A portfolio product allowed them to raise the second charge over a number of properties in the portfolio, which meant they minimised set up costs and raised the required level to extend their portfolio. Rates on second charge BTL mortgages have fallen in recent times and I expect this to be a growing market moving forward.

Anna Bennett

receiving less enquiries from individual and ‘accidental’ landlords than in previous years.

Interestingly, at the end of 2019 we were approached by two specialist lenders who are considering launching into the BTL seconds market and looking for feedback.

As there are less lenders offering second charge BTL than second charge residential, we would welcome more customer choice and product innovation. There are still however good products available for landlords today; some of our most popular at the moment include a 4.49% 5-year fix and a 4.99% 2-year tracker.

Ying Tan

marketing director, Positive Lending

founder and chief executive, Dynamo

Alistair Ewing owner, The Lending Channel

Last year we saw a defined rise in BTL seconds, but this came off the back of our increased lending to BTL portfolio landlords.

Many of our BTL landlord clients have legacy low rates with some of the mortgage lenders who are no longer lending – like Mortgage Express for example. Such borrowers are typically on good low rates but are unable to borrow more money on a first charge and a second charge solution has been proving very popular.

Stewart Simpson second charge mortgage specialist, Brightstar Financial We are definitely seeing an increase in landlords looking to raise funds against their www.mortgageintroducer.com

Despite achieving strong year-on-year growth in the second charge mortgage sector last year, our BTL seconds pipeline didn’t hit the usual upward trend. From 2017 to 2018 we achieved a 36% year-onyear growth in BTL seconds but from 2018 to 2019 enquiries actually fell by 21%, even though our residential seconds continued to soar. My colleague James Byrne, director of mortgages at Positive Lending, believes BTL seconds enquiries were negatively impacted by the landlord tax changes and 2019’s uncertain market, resulting in us

“As there are less lenders offering second charge BTL than second charge residential, we would welcome more customer choice and innovation”

We arrange very few second charge mortgages on existing BTL properties mainly because most landlords are already mortgaged at around 75% LTV and therefore don’t have the available equity. With property values looking to increase in the wake of growing consumer confidence, we would anticipate a rise in this type of business in the coming year. However, we are seeing more clients than ever before taking out a second charge on their residential property in order to obtain a deposit for a BTL. Rising property values are prompting many landlords to use newly available equity in this way. Taking out a second charge mortgage allows clients to avoid costly early repayment charges on their first charge mortgage. Top-slicing is also commonly available on second charge products to assist with affordability. We also work with one specialist lender that doesn’t stress test background portfolios, so again this works in favour of selecting a second charge when affordability may be an issue.

FEBRUARY 2020 MORTGAGE INTRODUCER

57

LOAN INTRODUCER

FEATURE

Could seconds advice As the market awaits the outcome of the Financial Conduct Authority’s recent consultation, Natalie Thomas asks if brokers will finally be compelled to offer second charges

A

s Loan Introducer was going to press, the mortgage industry was eagerly awaiting the results of the regulator’s ‘mortgage advice and selling standards’ consultation paper.

Many in the second charge industry are optimistic that if implemented, the FCA’s proposals could be a game changer for the sector by effectively forcing those brokers who are currently reluctant to recommend a second charge to do so.

Last year, the Financial Conduct Authority consulted on plans to make mortgage brokers explain to their clients why they had not recommended the cheapest product. While in theory this is what many mortgage brokers should do, and are already doing, the proposal takes the existing regulatory rules one step further.

So what impact could the ruling have on the second charge mortgage market?

CHOOSING THE CHEAPEST PRODUCT The idea was first aired last May as part of the regulator’s ‘mortgage advice and selling standards’ consultation paper (CP19/17). The proposal was a result of findings in the regulator’s Mortgages Market Study (MMS), which uncovered that around 30% of consumers could have found an identical suitable mortgage (or one with better features) that was cheaper than the one they bought. This it found was regardless of whether or not the borrower had used an intermediary.

Its consultation stated: “Intermediaries are reasonably strong at picking a product that does not have a cheaper alternative among the lenders they know well. But they are less strong at picking better value mortgages among lenders they are less familiar with. An intermediaries’ preference for familiar lenders could therefore lead to some of their consumers missing out on cheaper alternative mortgage products.” Because of this, it is proposing that where a sale is advised and the broker is not recommending the cheapest of the suitable mortgages from their product range, they must explain why to the customer and record the reason.

The FCA stressed that it did not want advisers to focus on price at the expense of recommending a

58

MORTGAGE INTRODUCER FEBRUARY 2020

mortgage that meets the customer’s other needs and circumstances.

For example, it said an adviser may decide to recommend a 2-year fixed rate mortgage with no upfront fees for a client.

But because the cheapest of these is offered by a lender known to have a slow speed of service and the customer prefers an offer quickly, the adviser may recommend the next cheapest mortgage.

AN OPPORTUNITY FOR SECONDS So, where does this leave a second charge? There is still a feeling amongst some in the second charge industry that their products are being shunned by some first-charge brokers, either through ignorance or an unwillingness to recommend a second charge – even though it might be cheaper for a borrower than a remortgage. Many mortgage brokers would however refute that by saying that second charges are rarely the cheaper option.

If the first argument holds true, then surely the proposals would bring this to light. There is hope amongst some in the industry that the regulator does not miss the opportunity to bring second charges further into the mortgage fold.

“It has been a regulatory requirement for brokers to consider a second charge mortgage alongside a remortgage, to identify the most suitable way of raising capital for the client since 2016 and yet we know that many brokers still fail to do this,” says Stewart Simpson, second charge mortgage specialist at Brightstar Financial.

Indeed since 2016, mortgage brokers have had to inform borrowers that cheaper options may be available when remortgaging but not expand on this if seconds were not in their scope. Even for those brokers who do have seconds in their scope, they have never been required to show the client if a second charge is the cheaper option.

“We believe, there is certainly a need for the FCA to implement more checks on whether or not brokers are considering second charge mortgages and even highlight examples where brokers are not properly fulfilling their responsibilities,” suggests Simpson. www.mortgageintroducer.com

LOAN INTRODUCER

FEATURE

become mandatory?

“We have to see a bigger behavioural change from brokers. We have started to see a shift already, with more brokers being comfortable to advise on a second charge mortgage or refer the case to an expert. This trend must continue as second charge mortgages become more competitive, more aligned to the first charge market and more brokers understand the many uses and circumstances when a second charge can deliver a better customer outcome than a remortgage.”

Alan Cleary, managing director of Precise Mortgages is also confident that if the FCA’s proposal is implemented, it will lead to an increase in the number of customers considering second charge loans. “It’s a good move by the FCA,” thinks Cleary.

“Anything which makes the mortgage process more transparent is something to be welcomed.

“It’s always worth bearing in mind that while cost is obviously a major factor when customers are looking for a remortgage, there are circumstances where the overall transaction cost should be considered.

Second charge loans offer a viable alternative in a wide variety of situations, including for customers who want to avoid the early repayment charges that could be incurred with a remortgage”. Until the final proposals are published, there is still some uncertainty as to what it would mean in practice.

LITTLE BEARING Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, believes there is a good chance of the proposal being implemented but he thinks it will have little bearing on the second charge market as the FCA will not make brokers look outside of their existing scope.

“A firm will already have made a decision as to whether a second charge is in their scope before they have to do the comparability piece of work at the end,” he says. “I’d be very surprised if the FCA forced brokers to expand their scope to include seconds because that’s not been its intention in any of the discussions we have been having,” he reveals.

Nonetheless, under the proposal, many firms who already cover seconds within their scope would need to overcome any reluctance they may have in assessing them thoroughly alongside firsts. Logically this could lead to increased consumer exposure for seconds.

Sinclair also still has questions over how it will work and how the regulator will define the ‘cheapest’ product. “On what basis will it define the cheapest product?” he asks. “Will it be on the monthly payment, the lowest APR, or the cheapest period within the fixed www.mortgageintroducer.com

rate or the entire term? I struggle to work out what the answer is because there are so many multiples,” he warns.

There are also those who think even if brokers are forced to widen their scope, it would still make little difference – due to a second charge rarely being the more ‘suitable’ option. “The FCA’s proposal to require brokers to tell a client why they have not recommended the cheapest mortgage is unlikely to drive more business to the second charge market,” says a doubtful Gemma Harle, managing director of the mortgage and financial planning network for Quilter Financial Planning.

“It is unusual that a second charge mortgage is appropriate if a customer can afford and meet the criteria of its mainstream lender and also that it will be the ‘cheapest’, within budget and the most suitable. Ultimately, this boils down to the fact that price is only a part of assessing suitability,” she points out. “Similarly, the FCA’s proposal doesn’t impact independent mortgage advisers as they are currently required to consider second charges if they want to use the word independent in their title or literature, and therefore in theory they should always be considering a second charge regardless.

“These changes are more about evidencing to the customer that although there may be a cheaper product on the market it does not necessarily meet their needs. Ultimately these changes will probably just result in a lengthier suitability letter,” she concludes.

Buster Tolfree, commercial director – mortgages at United Trust Bank believes that if brokers are doing their job correctly, they should already be recommending a second, thus the ruling would have little impact.

“Under the existing regulatory framework, mortgage advisers already provide consumers with a ‘reasonswhy’ letter,” he states. “The cheapest interest rate is not necessarily always the best one for the consumer as interest rate alone doesn’t reflect lender nuances.

FORWARD- LOOKING If the proposal essentially forces brokers to widen their scope and state why they didn’t advocate for the cheapest, it could indeed open the door to second charges through greater consumer recognition.

Likewise, even if the ruling does not do this it should at least mean that those with seconds currently in their scope are made to carry out a thorough comparison, which can only be a positive step for the market. As with most things, the devil will be in the detail. M I FEBRUARY 2020 MORTGAGE INTRODUCER

59

INTERVIEW

BRIGHTSTAR

Bright times Mortgage Introducer caught up with Bradley Moore, managing director at Brightstar, to find out about the challenges and highlights of 2019, and his plans for 2020.

How was 2019 at Brightstar?

control so its key to focus on the things you can impact and not the things you can’t in business.

Last year was definitely a halcyon year for us as a business and it got off to a very strong start in February when we were named the Best Small Company to work for in The Sunday Times. It was a very big thing for us to achieve that at the first time of asking. Our objective from the outset was to make it onto the top 100 list so to come out on top was amazing, winning any award is good but that was extra special and I picked up the award on the night and was able to say a few words, so that was very much a personal highlight.

Anyone that knows the business will know that our people are very important to us and so I was also really pleased at our continual level of retention of our key staff throughout the year. This is a very competitive market and, to keep hold of so many great people show the great culture we have here and bucks the trend in the sector.

2019 was Brightstar’s best year to date, we increased turnover by 10.8%, new business was up by 18.4% and we completed on 14.4% more cases. We also won the small matter of 19 awards along the way.

Our Sirius business continued to grow and break records whilst attracting lots of new talent, so they have set themselves up nicely for a great 2020.

We continued to deliver fantastic customer service in 2019 resulting in 719 five star Trustpilot reviews and finished the year with our average score at a fantastic 4.9 out of 5.

What is your take on the industry currently?

Have you seen any changes since the political environment calmed down?

What were your key highlights?

What were the biggest challenges you faced throughout the year?

I try to be detached from politics, but it was difficult to ignore the impact that Brexit had on the market. If there was one thing that stalled our business in its best year to date, it was Brexit, it just shows what could have been done without it and that bodes well for 2020.

There will always be contributing factors beyond our

60

MORTGAGE INTRODUCER FEBRUARY 2020

The result of the General Election looks like it has returned the stability that the sector has needed since 2016. We have flown out of the traps this year, there has been a lot of activity and it seems that, to an extent, normal service has resumed in the market, if not better.

The industry as a whole is in a great space, particularly in the specialist sectors. The challenge in this market, with so much competition, is to continue to look to do things differently. Too many businesses just continue to do the same thing and are happy just to turn up to the party, we always want to innovate and do things differently. That’s why we invest so much effort in educating our people and introducers, we look to grow the market and therefore the opportunity.

The outlook looks as good as it has done during our nine years of trading.

Brightstar saw a lot of new recruits and promotions in 2019, including a national account manager and head of mortgages. How important is recruitment for you in 2020?

We are a ‘grow your own’ business so recruitment, and getting the right people into the business, is very important but so is retention and developing people within the business. Both Darren Perry and Gina Blagden have recently been promoted into new management roles, having both started life as business writers. Darren, who joined six years ago, worked his way up to lead our second charge team and has now been made national account manager. While, Gina, who also joined Brightstar six years ago, was the head of our first charge residential team and has now been promoted to head of mortgages to include BTL. It’s

INTERVIEW

BRIGHTSTAR

ahead Bradley Moore

great when you see people, who are a good cultural fit for the business, and have a proven track record, taking on more responsibility and being even more successful. Recruitment will be important in 2020 though. We have already advertised for six new roles in January as we believe there are lots of opportunity this year, particularly after the year we have just had.

It’s important to not just recruit the right size of team, but of course to get right type of people.

Do you prefer to internally or externally recruit?

I have no preference personally. If we create a role, I want to see it taken by the best person for the job, regardless of who they are. Every role at Brightstar is advertised internally as well as externally, and we are just as excited about developing people within the business as we are attracting new people to it.

Brightstar is very passionate about training and education. Do you believe the industry is getting better at both or is there still some way to go?

We are a business that takes training and education very seriously, both externally and internally. You only have to look to our marketing to see that it is based on information and education rather than a hard sell.

We’re obviously a sales-focussed business but we certainly aren’t a hard sell business, we educate people www.mortgageintroducer.com

to recognise opportunity and we deliver the solutions.

Developing our people is also very important. How many other businesses in our market have a people development director? And we have a fully scoped People Development Programme Greenhouse that is ably supported and sponsored by our friends at MT Finance.

We like to spark conversations about other issues as well, which is why Brightstar has been so involved in mental health campaigned and the Women in Finance Charter, as well as offering work experience and training programmes to young people in our local area.

What are your plans for 2020?

I have worked with Rob (Jupp) since I was 23 and people who know us well will know that I am naturally much more cautious than he is. We have very different attributes, which is one of the reasons we work so well together. But, even as the cautious one, I cannot see 2020 being anything other than our best year to date again. I’m expecting big things – so much so, that Rob will possibly start worrying now I’ve stopped.

We will continue to grow our distribution and we have entered The Sunday Times Best Companies list again. Can lightning strike twice?

I expect us to out-perform our 2019 results and play an even more significant part in the specialist sector in 2020! M I FEBRUARY 2020

MORTGAGE INTRODUCER

61

SPECIALIST FINANCE INTRODUCER

BUY-TO-LET

Rediscovering buy-to-let Phil Jay director, Complete FS

I

t has become something of a cliché to preface any discussion of the buy-to-let sector by invoking a tabloid inspired nightmare scenario defined by punitive increases in government taxation, sickening restrictions in lending criteria, stark reductions in profits and a near exodus of landlords choosing to sell up and quit the market.

Yet, as we embark upon the start of a new decade, there are growing indications that the (BTL) sector is beginning to experience an upturn in fortunes, with recent figures from the Office of National Statistics (ONS) revealing that rental values in London have risen at their fastest rate since August 2017, growing by an average of 1.2% in the year to December 2019.

Moreover, analysis by Yahoo Finance UK has suggested that this growth is set to intensify over the coming months as demand for rental accommodation continues to outweigh the availability of suitable properties, particularly in the capital. Property costs also continue to push home ownership beyond the means of many would be first-time buyers.

STRONG GROWTH

Experts have suggested that a further increase in prices will raise the numbers of people looking to rent even higher, yet as political conditions begin to stabilise and uncertainties start to dispel, there are numerous signs that the property market is on the verge of a comparative boom period.

Indeed, figures provided by Halifax have revealed that house prices grew by a remarkable 1.7% in December as markets and levels of consumer confidence began to revive in the wake of the General Election result.

Moreover, buyer enquiries have also

62

risen sharply in the past few weeks (by up to 28% in the four days following the election, according to Rightmove), with a number of recent sentiment surveys reporting a demonstrable rise in sales expectations for the next 12 months.

Yet, as the potential for renewed growth becomes increasingly apparent to landlords and the number of investors returning to the market continues to grow, so too are lenders looking to exploit this resurgence and to achieve greater sales.

For advisers and landlords, 2020 could be a very good year to take advantage of a market that is seemingly ripe for the plucking.

BUY-TO-LET PRODUCTS

According to data published by the Moneyfacts website, for example, the overall number of BTL market products has soared to its highest level since the financial crisis, with almost 4,000 options currently available to investors; an 11% increase on numbers for the previous year.

In addition, escalating competition between lenders, particularly those within the specialist sector, has led to a substantial reduction in rates over the past few years, with one of the highest profile lenders, Paragon discounting their rates for two and five year deals to a new starting low of 2.65% in January - a trend which seems likely to accelerate.

While there is little doubt that higher stamp duty and reductions in tax relief have continued to inhibit growth, there is also a sense that the main ‘shock-blast’ has diminished as landlords continue to find new ways in which to evolve and adapt to current conditions.

According to our experience, 74% of BTL purchases are now conducted via limited companies, with increasing numbers of landlords seeking to take advantage of the tax breaks offered by incorporation.

In addition, the type of stock which they are buying has also diversified,

MORTGAGE INTRODUCER FEBRUARY 2020

with HMO and MUB properties, as well as conversions and industrial units offering the most attractive yields. Additionally holidays lets have also experienced an upturn in applications over the past 12 months, rising by 19% for the first two months of 2019 when compared to the same period two years ago, according to the Leeds Building Society.

Yet, perhaps most importantly, the means by which landlords have sought to achieve their funding has also undergone a process of change, with specialist providers offering an underwriting approach which is demonstrably more flexible and responsive to individual and market circumstances than the automated structures offered by mainstream providers.

BACK IN BLACK

Indeed, the specialist market has grown considerably over the past few years, experiencing a substantial 15% growth rate in BTL lending over 2019 alone, with some areas, such as the second charge market, posting particularly strong returns - a sign of things to come.

In fact, rates for second charge BTL products are becoming comparable with first charge rates in some cases, allowing landlords who are looking to achieve short-term investment finance or cover refurbishment costs to ‘top up’ loans with a second-charge product, rather than run the risk of remortgaging with potentially higher costs.

In addition, these products cater to a range of complex cases without affecting the first charge loan and also entertain a number of repayment methods, including interest only, demonstrating the sheer flexibility and applicability of specialist options.

Lastly, with both property markets and rental yields beginning to show positive gains and lending products starting to demonstrate even greater affordability, the specialist market looks certain to be the place to be for 2020 – the return of BTL. M I www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER INTERVIEW

NETWORKS

Full advice service is key Shaun Almond managing director, HL Partnership

A

s we look forward to what the year has to offer, one prediction which is a pretty well nailed on certainty is that the scale of product transfers will continue to grow.

Nearly 18,500 pound for pound remortgages were completed in November last year, according to UK Finance, and the ease with which product transfers can be completed will encourage greater numbers of mortgage holders to stay with their existing providers irrespective of the fact that with a little advice customers could save money. We only have to look at the costs involved in moving home or moving mortgage to see why

the popularity of product transfers is growing.

However, because of the transactional nature of a product transfer, there is a hidden danger that the very simplicity of the decision leaves little or no time to ensure that a customer’s protection needs are reviewed as well.

At a time when advisers’ value is at risk because customers might see little value in the product transfer process, it is important that firms offer a full advice service, which should include a proper review of customer needs.

The regulator is adamant that a full insurance discussion should never be optional for a customer entering or revisiting the mortgage process, however product transfers because of their very nature, are more likely to result in fewer of those protection discussions taking place.

Let’s face it, we all know how many new ‘never happen to us’ homeowners

decide to defer commitment to protection in the face of the impending payment burden of their mortgage.

It is easy for advisers not to press customers and certainly with something as easy to arrange such as a product transfer, it can be even easier to ignore.

However, advisers must bear in mind the commitment they make to their customers when handing over the IDD. While providing advice on appropriate product transfer candidates is the most pressing task, there is a risk that the process becomes merely transactional and does nothing to reinforce and foster the relationship between both parties.

It is easy to diarise a follow up to discuss protection but there are still too few mortgages being protected.

A key focus in 2020 is to put protection firmly at the heart of every customer conversation and as such, provide all of the tools which advisers need to engage customers. M I

SPECIALIST FINANCE INTRODUCER

FIBA

A great time to write business Adam Tyler executive chairman, FIBA

T

here is a new feeling of optimism in the property market and the finance industry that supports it. Like many people in the country, we needed the feeling of stability to replace the uncertainty we have had for a couple of years, in whatever form that would take.

There has been little time to digest the full impact, but it is clear that developers and property entrepreneurs of every size will be dusting off plans, which will require funding.

I am hopeful that the government’s intentions towards the property and finance markets will become clearer when the first budget from this new administration is showcased in March.

Personally, I am feeling very optimistic about prospects for our sector this year and especially so for our members, as FIBA continues to grow and build its proposition and services.

GROWING PANEL

As we are likely to experience growing demand for finance from SMEs, one of my priorities is to continue to build our membership by offering the best specialist property finance alternatives via our growing lender partner panel.

That panel itself already offers a strong variety of lending options, but I am determined to ensure that in response to the growing membership, FIBA’s members have access to the widest range of specialist property finance lenders that cover all potential scenarios.

In support of our lenders our move last year to appoint legal firms to our professional partner panel with specialist knowledge of the commercial

64

finance sector has been very successful.

Many members have remarked on the difference it has made to their ability to complete complex commercial funding deals by having a legal firm from our panel dealing with their projects.

There will be more announcements during the year where FIBA will introduce new vetted lenders and legal firms to the respective panels.

There are three key areas that we will also want to lead on over the coming 12 months.

“Areas such as fee transparency, default fees and disclosure, on which the FCA is already consulting, could be improved by early voluntary adoption and we also need to ensure that we are demonstrably providing better support across the industry to customers” 1. Specialist Property Finance Industry Forums. Our experience last year demonstrated the value of bringing lenders, brokers, solicitors, surveyors and insurers together.

FIBA has always reached out to other trade bodies and these events were held jointly with the ASTL and proved the value of cooperation between trade bodies. There were three events in London last year and their success could be measured by the fact they on the last two events we had to turn delegates away. These joint events are so important to our industry because at the moment they the ONLY places where all interested parties can come together and FIBA has plans to take these events national in 2020.

2. Future Regulation. We all think it

MORTGAGE INTRODUCER FEBRUARY 2020

is coming, but it is up to us to prepare the ground so that we are ready. Areas such as fee transparency, default fees and disclosure, on which the FCA is already consulting, could be improved by early voluntary adoption and we also need to ensure that we are demonstrably providing better support across the industry to customers.

Dealing with customers requires a unified approach with brokers and lenders airing their issues and establishing shared standards that ensure customers are treated fairly..

3. Complaints Handling. There is a gap which could be affecting the take up of specialist property financial advice which is why FIBA wants to be at the heart of the discussions on dealing with our industry complaints that are received by lenders on brokers and by brokers on lenders.

GUIDANCE AND SUPPORT

We must not forget how the legal advice process affects these customer issues, so we want to determine how we are able to provide guidance, support and up to date regulatory support to newcomers and experienced advisers alike.

This does not have to be a standalone process, but a combined approach across our industry with all interested parties playing a role in its formation and ongoing practical use, so that ultimately complaints from lenders or brokers are dealt with by an impartial body representing both sides In closing, I believe that the sector is primed for what could be a great year for specialist finance professionals across the UK. With the domestic political situation resolved for the next five years and the opportunity that a settled government can afford will help developers and SMEs to regain the confidence to expand their activities.

Certainly, there are probably challenges coming down the road, in the form of greater regulation, but as I have said, bringing the industry together to adopt a unified approach to some of the more pressing issues, will help to ease our way into a more harmonious acceptance of the extra oversight that we can expect. M I www.mortgageintroducer.com

Did You Know?

During the Vietnam War, U.S. soldiers used Slinkys as mobile radio antennas

As exible as an development loan New Build, Conversion and Refurbishment 0208 349 5190 alternativebridging.co.uk

THE MONTH THAT WAS

HALL OF FAME

Broadly speaking

R E D C A R P E T T R E AT M E N T. . .

T

here are certain people in the industry you wouldn’t want to meet down a dark alley.

Two of which are amateur boxer Ashley Ilsen of Magnet Capital and broker and ex-rugby player Harry Hodell.

However, England cricketer Stuart Broad had no such luck after being accosted by the pair in London’s West End. Broad told the HoF: “I was minding my own business walking down the road when I was grabbed by these two lumps.

“Both of which were in vino and rather boisterous. There were times when I was worried for my virtue.”

The HoF doesn’t blame you Broady. That could have gone a very different way.

Congrats on getting away clean.

Shifting timber

I

t’s that time of year when everyone is falling off their dieting wagon. The overindulgence of Xmas and the New Year has been forgotten and replaced with the dreariness of February. A dreariness which encouraged many of us, HoF included, to elbow their way back to the bar and get back into the swing of ordering the regular at the kebab shop.

However some people have done better that most. Step forward The Money Group director, and part-time plus size model, Scott Thorpe.

The boy from Rotherham has been much more commonly seen with a pie and a pint rather than a salad over recent years but things now seem to have changed.

As part of TMG’s Get Fit, Get Healthy initiative Thorpe has managed to shift a stone so far as he looks to hit a two stone weight loss target.

Well done Scott – keep up the good work and don’t be tempted by those pies.

66

MORTGAGE INTRODUCER

FEBRUARY 2020

Runners in the storm

S

torm Ciara may have stopped the London Winter Run, however, there was no stopping MI publishing director Robyn Hall, who decided to complete the 10km distance on his own anyway (pictured). The idea behind completing the run originated from a Tweet by his wife Emma Hall, which caught the eye of Russell Martin, founder and managing director at Finance 4 Business, who donated £500 straight away when he heard the proceeds would be going to Cancer Research. Brightstar boss Rob Jupp followed this up by promising an additional £500 if his co-director Will Lloyd could join in.

The total figure raised by Hall and his merry band of runners reached £4,530, plus £130 in gift aid, through the fundraising page, JustGiving.

Despite the London Winter Run having been prevented due to the weather, other industry members decided to join Hall and Lloyd in running the 10km distance. These figures included Karen Rodrigues, corporate sales manager at Vida Homeloans, Buster Tolfree, commercial director at UTB and Damien Druce, consultant at The Druce Consultancy.

T

his month MI welcomes a new talent to its fold with the appointment of Jake Carter as deputy news editor.

Flipping through the HR files [as the HoF is prone to doing .ed] it was with great surprise that the HoF found out the wordsmith’s middle name.

Robert, Stephen, Thomas… no, no, no. Mr Carter is no less Jake Jazz Carter. An unusual name indeed.

MI publishing editor Ryan Fowler gave his take on it to the HoF “I think his parents must have been preparing him for a career where he will never make any money. Jazz musicians and journalists both have that it common.”

Indeed they do Mr Fowler. What’s the old joke: “What’s the difference between a journalist and an extra-large pizza?

The pizza can feed a family of four.”

Let’s hope that Carter can do a bit better than that. Best of luck Jake!

FOR

BUY TO LET MORTGAGES

Buy to Let Mortgages for complex cases Here at Precise Mortgages we’re proud to help landlords with complex lending needs as well as those who have been underserved by high street lenders. Whatever their circumstances we have a broad range of specialist lending solutions.

Refurbishment Buy to Let Maximise rental yield and increase capital growth

ÂŁ

Top slicing Use disposable income to demonstrate affordability

Portfolio landlords A dedicated team to do the heavy lifting for you

Multi-units and Holiday Lets 5 year Fixed rates

5

Affordability assessed at pay rate

Contact your local BDM 0800 116 4385 precisemortgages.co.uk

FOR INTERMEDIARY USE ONLY.

Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549).

Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

01966 (1)

Get in touch

HMOs and Limited Companies

As one of the UK’s leading specialist lenders, we’re committed to providing: 365

Automated decisions available 24/7, 365 days a year via our online mortgage portal Decisions in principle that only leave a soft footprint Experienced intermediary support teams, including New Build, HMO and Limited Companies Direct access to underwriters for queries about applications in progress A searchable online criteria guide A range of calculators to help you understand the loan size available to your customer Submission checklists to avoid unnecessary delays with your application Award winning service, with over 100 awards recieved for our products and service

precisemortgages.co.uk FOR INTERMEDIARY USE ONLY