Mortgage Introducer April 2020

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EDITORIAL

COMMENT Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com

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Rising to the challenge

T

here is no denying that we are currently in very challenging times. Businesses are now finding themselves having to adapt as the country changes on pretty much a daily basis.

Lenders are, rightly so, having to change their products due to the ongoing coronavirus (COVID-19) crisis. Loan-to-values (LTVs) have had to drop due to the lack of ability to carry out surveys and we are seeing more lenders cap loan sizes.

These changes were only to be expected given the current situation.

The positive to take out of this is that lenders are removing risk in the shortterm rather than suffering with liquidity issues which would cause long-term problems.

For brokers this is a difficult time.

Many are self-employed and with the market on hiatus by government order these must be worrying days.

However, the market will come back.

Government announcements of support for those in need is reassuring but it has to translate into the real world.

And with banks under fire for denying emergency loans to some

firms, it’s hardly surprising that the government is facing more calls for direct intervention.

This issue our commentators have given their take on the current crisis and how they see the situation panning out. As a publication we are committed to supporting the mortgage community at this time and will continue to provide a platform for the market to share its news and views.

Communication will be key whilst this crisis is ongoing, and I’d call on all of the market to make sure it is having open and frank conversations with everyone involved. Competition is a great thing for any market but for now everyone is facing the same challenges. It’s a time to unite and share information.

Finally I would like to offer our condolences to the family and friends of Dean Mason who sadly passed away this month from coronavirus.

Mason was a columnist for Mortgage Introducer and a friend of many in the industry. It is a tragedy to that he has been taken away from his family far too soon.

God bless and stay safe. M I

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MAGAZINE

WHAT’S INSIDE

Contents 7 AMI Review 8 Market Review 10 Adverse Review 12 First-time Buyers Review 13 Shared Ownership Review 15 Education Review 16 High Net Worth Review 17 Buy-to-let Review 21 Protection Review 27 General Insurance Review 29 Technology Review 33 Equity Release Review 37 Conveyancing Review 38 Learning Review 39 Complex Review 40 The Outlaw Never waste a good crisis

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FROM THE FRONTLINE

50

COVER: EYE OF THE STORM

50 Cover: Eye of the storm Mortgage Introducer looks at the impact of the coronavirus outbreak on the mortgage market and how it may change the future as much as it has the present 50 Loan Introducer The latest from the second charge market including an interview with Matthew Elliott co-founder at Nivo 57 Specialist Finance Introducer Development finance, bridging and FIBA 62 From the frontline Supporting the NHS and mourning the lost

www.mortgageintroducer.com

40

46 18

THE OUTLAW

THE OUTLAW

EQUITY RELEASE

APRIL 2020

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REVIEW

AMI

Keeping your customers safe Robert Sinclair chief executive officer, AMI

I

t’s hard to believe that, at the time of writing, it’s been less than two weeks since the UK went into lockdown and Zoom, Microsoft Teams, WhatsApp and Skype became our preferred way to communicate.

In an industry that has always favoured face-to-face contact, the changes that came thick and fast have altered our routines immeasurably and, I suspect, will make us stronger and more resilient.

In the mortgage industry there’s been a strong sense of everyone working as a team. Mortgage clubs have been sharing their information with all and the sourcing and criteria systems have been working hard to ensure that their systems are up to date with the raft of changes that come in throughout the day to allow brokers to remain at the top of their game. Many have been delivering this for free.

One thing that has always been the mainstay of a good mortgage adviser is contact and this is arguably now more important than ever.

Keep in contact with your customers: they need to know that you are there for them now but also that you will be there for them when life is closer to the norm that we are used to, when they will be potentially more vulnerable with more debt.

Your customers need to know that mortgage payment holidays aren’t for everyone, the interest is merely deferred to a later date and that anyone who takes “a holiday” will see their mortgage payments rise.

There may be other more suitable solutions for your client and at this time advice is key. You can talk through their options and assess what is the most suitable for them taking their personal circumstances into account.

The 2008 crash has taught us that www.mortgageintroducer.com

whilst, on the whole, consumers will do whatever they can to keep up with their mortgage payments, protection cover is often an early casualty when people reassess their finances.

PROTECTION PREMIUMS

Of course, that may not be the case in a global pandemic; people may feel the need to keep up payments on their protection premiums more acutely than ever. However, a reminder of the protection policies your customers have in place and the cover this affords them may be timely when they are looking to cancel unnecessary direct debits.

Think about whether you’re going to need to furlough anyone in your team. Doing it sooner will provide the cash support needed. However, firms need to make sure that they still have appropriate systems, controls and oversight over the operation. Cutting

“This period will test all of us. Mortgage intermediaries have regularly proved their worth” corners on identification or on full fact finding and advice might fall foul of lender compliance checks later.

If a business interruption loan is needed then apply as soon as possible so it’s ready for you to draw down when it’s time – rather than battling through the application process under pressure.

This period will test all of us.

Mortgage intermediaries have regularly proved their worth. We will do now and will again, to ensure that the right advice is given to help people come through this in the best possible financial shape. M I

Reserving judgement on FOS

A

MI has waited patiently for an update on FOS’ 2020/21 consultation, which arrived via a statement on, of all days, April Fool’s day with the final budget and summary of consultation feedback to follow.

Yet it would be foolish to think that this is a fair outcome, especially as FOS has ignored many of the suggestions that AMI had proposed.

Crucially, FOS is continuing to apply the increased case fee of £650 for cases closed after 1 April 2020 – this is regardless of when the case was referred to them. AMI’s suggestion was to apply a fairer and more transparent approach of applying this to complaints received after this date, as the timescale for adjudication is often with FOS and not the firm in question.

Whilst some press headlines have commented on the savings for firms and that FOS has understood the financial pressure firms are under by asking the FCA to freeze all minimum levies at 2019/20 levels, this is a false economy as FOS is utilising their reserves which

will need to be topped up in the future.

This will cost all firms. So, although this provides some temporary respite which is welcomed, it doesn’t address the fundamental shift away from a polluter pays model. It is positive that case fee exemption will remain at 25 for firms as this benefits all (but will assist mortgage networks less as the number of cases applies to each authorised firm and not an appointed representative). It will also give some reassurance to firms who have seen an increase in DSARs (Data Subject Access Requests) from Claims Management Companies that they can fight frivolous claims with confidence.

Now is more important than ever for FOS to engage with all industry sectors.

There will be an increased demand on its services during these unprecedented times and much to learn from and share.

AMI welcomes regular updates and insight from the service, as it’s crucial that the financial services industry collaborates and communicates to get through these tough times together.

MI

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REVIEW

LENDING

Maintaining a strong market presence David Lownds head of marketing and business development, Hanley Economic Building Society

W

hen sitting down to write a piece on the lending market, I have to say that it’s difficult to know where to start and what to focus on.

Things are changing every single day at such a pace that it’s difficult to assess the lending marketplace with sufficient clarity. As such, it was important for the government to step in, and lenders are fully behind helping vulnerable and struggling borrowers where we can.

Another important role for lenders in the current climate is to maintain an approach where we educate, inform and help customers, intermediaries and strategic partners as best we can in order to help them make the most sensible and responsible of choices.

We also have an obligation to maintain a strong market presence and continue generating business where possible in a responsible and appropriate manner, as it’s important for the wheels of the housing and mortgage markets to keep turning.

HOMEBUYERS

On a positive note, we are operating on what remains a relatively robust lending platform and housing market.

According to RICS Residential Market Survey, respondents noted a 20% rise in buyer enquiries in February, marking the third consecutive month of growth.

The survey showed that new homes coming onto the sales market increased for the third straight month, with new instructions seeing a net balance rise of 15% last month.

The West Midlands and South East led the way, recording the greatest bump in new properties coming

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onto the market. As a result of strong demand, the number of contributors reporting house price growth was 29%, up from 18% in January.

The data outlined that there was growth in all regions of the UK. London, Yorkshire and the Humber and East Anglia reported the strongest house price increases.

Furthermore, 22% of contributors predicted that house prices will continue to rise further over spring, and almost two thirds (61%) of survey participants believed more homes will be sold as the year progresses.

However, even at the time this data was released, property professionals raised concerns regarding the early impact of coronavirus on the viewing of properties. Of course, such data does not fully take into account the dramatic grip taken by the virus in recent weeks.

Exactly how this will affect the housing market in Q2 remains to be seen.

For the time being we can only work with existing data, be sensible in our expectations and track trends as closely as we can to try and generate the solutions which matter for a range of homeowners, landlords and tenants.

FTBS AND SECOND STEPPERS

Focussing on homeowners, the price gap between the first-time buyer and the second steppers markets is said to be at its highest reported level since 2008, according to data collected by Project Etopia.

The analysis is based on the FTB market being representative of flats, and the second steppers of terraced houses. Looking at the gap between the two types, this is said to have increased by 141% since the financial crash.

In monitory terms, this represents an increase of £20,744 to £49,916.

On a regional basis, the margin between the two markets is smallest in Manchester at 4.1%. In Luton, the average price of a terraced house was

suggested to be 56.8% higher than the average flat.

NEW BUILD

Research from Stone Real Estate outlined that the value of new homes delivered to the market by the UK’s biggest housebuilders over the past year is on the rise, and is on par with the GDP of Cameroon.

The study looked at the number of homes delivered by 10 of the UK’s biggest housebuilders over the past year, the average price they achieved and what this equated to as a total value of property entering the market.

Across the 10 major developers, 89,805 properties were delivered to the market last year to a total value of £26.62bn, which is only marginally lower than the GDP of Cameroon (£26.94bn) and ahead of Yemen, Libya and Latvia.

The best performing housebuilder was Barratt, which delivered £4.89bn of property to the market last year alone. This was closely followed by Taylor Wimpey, which also delivered £4.32bn worth of housing. Persimmon (£3.42bn), Bellway (£3.18bn) and Berkeley (£2.77bn) all ranked similarly.

THE FUTURE

Future generations are more likely to live in rented accommodation than today, according to the Office for National Statistics.

Data collected by the ONS showed that among households in England containing someone aged 60 or over, less than half who rent have savings or investments.

In contrast, of those who own their homes outright, three quarters have savings or investments. However, while a quarter of those who own their property outright have at least £50,000 in savings, a quarter have amassed no savings at all.

The financial burdens facing many of those in later life is certainly a pressing issue, and an area which government and lenders need to address.

Much of this makes from some tough reading, which only emphases how closely we need to stick together in tough times and help each other through to the other side. M I www.mortgageintroducer.com

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REVIEW

ADVERSE

Painting the picture Paul Adams sales director, Pepper Money

A

t Pepper Money, we have recently completed the second round of our ongoing research into the attitudes and characteristics of potential mortgage customers with adverse credit. The study was undertaken in February amongst a nationally representative sample of more than 4,000 adults. Of these, 598 (around 15%) had experienced adverse credit, defined as having missed credit payments or loans, and/or had a county court judgment or debt management plan within the last three years.

This timeframe was chosen as it is typically those clients who have experienced adverse credit within the last three years who are generally better served by specialist lenders rather than the mainstream.

“There are many potential hazards that could trip your clients and leave a mark on their credit record. So, it’s important that you are well equipped to help your clients with adverse credit” Based on the latest Office for National Statistics projection for the UK adult population of 52.4 million, we can estimate the number of people considered to have adverse credit to be 7.86 million.

While 15% of adults have experienced adverse credit in the last three years, the research also revealed that 41% have missed more than one credit payment in their lifetime. That’s more than 21 million people.

It’s a big section of the population, and with a growing number of ways

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for people to take credit, such as the ‘buy now, pay later’ service Klarna and the proliferation of personal contract purchase car finance, there are many potential hazards that could trip your clients and leave a mark on their credit record.

So, it’s important that you are well equipped to help your clients with adverse credit.

Here are some of the insights that we have gained from our research about people with adverse credit: AGE

The research found that adverse credit impacts people across all age brackets. Perhaps unsurprisingly, the category with the fewest people who have experienced adverse credit is those adults with the least financial experience, aged between 18 and 24.

Across all other categories, even older borrowers over the age of 55, there is a relatively even split.

GENDER

There is also a fairly even split across gender, although this round of research found that slightly more of those with adverse credit were female (53%).

SOCIAL GRADE

More surprising perhaps is the continuing trend from the previous wave of research, which found that the majority of adults who have experienced adverse credit in the last three years are from the more affluent ABC1 social grade (53%), as opposed to the less affluent C2DE grade (47%).

TYPES OF CREDIT ISSUE

Of the 15% of UK adults who have experienced adverse credit within the last three years, 11% had missed a credit payment and 5% had missed several consecutive payments on a credit card, loan or agreement, which resulted in a default.

A further 4% had missed payments on an unsecured loan that remained unpaid for more than 30 days, and 4% had entered a debt management plan.

Despite the frequent dialogue about the growing number of CCJs, only 3% of the group had registered a CCJ in the past three years.

CURRENT OUTSTANDING DEBT

Adults with adverse credit in the last three years have less outstanding unsecured debt than you might expect.

According to the research, 53% of adults with adverse credit in the last three years currently have less than £5,000 of debt (excluding mortgages and student debt) and 14% have no debt at all.

To put this in some context, the Trades Union Congress recently said that average unsecured debt per household had reached £15,385.

According to the study, only 11% of adults with adverse credit in the last three years have more than £15,000 in unsecured debt currently.

Those aged between 45 and 54 are the most likely to have more than £15,000 (15%), and 55+ year olds are the most likely to not currently have any debt (25%).

PLANS TO BUY A HOME

This is the statistic that is most relevant to you, and the one that should make you sit up and be excited by the opportunity to help a growing number of clients.

Of the 7.86 million people who have experienced adverse credit in the last three years, the research found that 17% are thinking about buying a property in the next 12 months. This means that 1.34 million people may need support from a broker.

This number has increased by nearly 80,000 since the last time Pepper Money conducted its Adverse Credit Study, last October, and demonstrates a growing opportunity to help borrowers buy a home or refinance.

The increase has been driven by more people with adverse credit intending to purchase buy-to-let properties to rent out in the next year, and this highlights an important growth market for your business. M I www.mortgageintroducer.com

REVIEW

BROKING

To thrive or survive?

That is the question…

Abi Greenhalgh, director, Nest Financial Services

I

’ve just come in from the garden, after spending our first weekend ‘locked in’ due to the coronavirus…

In all fairness it has been great – the first time in years where myself and my husband have stopped still, no swimming galas, football clubs, band practice, athletics training (we have three children so are forever dashing from one activity to the next whilst juggling the day job).

But this new found time has also allowed me the space to think and more importantly think about the type of week I want to have ahead of me, and the fact that it is my choice to influence its success.

I’m a one–man band … well a one-woman band actually, with one administrator and currently, as with so many of you, my office is closed and the business has been moved back into home. But, unlike many, my business is still a baby – only 2 ½ years old – our client bank naturally smaller than most, and if I was to allow myself to wallow in the negativity that has been circulating on social media and in the press this week – I wont have a business

by September.

Now, for those who know me, I’m not really one for listening to the ‘glass half empty’ people – I’ve been here before, I’ve worked in the Intermediary sector for over 15 years, I remember the credit crunch well (and survived), I’m passionate about my industry and am an active member of the AMI board – But, what about all you one, two or three man/woman firms who have got yourselves stuck in freefall and cant currently see a way forward? Whose world is so noisy with negativity and www.mortgageintroducer.com

doom and gloom, you can no longer see the wood for the trees?

Everyone knows being self employed can be incredibly lonely – there is no one to hold you to account, your day can magically disappear before your eyes, with nothing concrete delivered or achieved - so for all you singletons out there, here are a few things I will be focussing on this week (and in the coming weeks) to make sure we thrive rather than survive!

1) Control what you can control – stop waisting time scrolling on facebook, watching the news or whatever other distractions are stopping you from driving your business – take your underpants off your head, grab hold of the passion within you and get back on top of your game, and remember you are brilliant at what you do!

2) Know your Numbers – This isn’t about focussing on how many mortgages you wrote in April 2019, or last month, or last quarter – this is about knowing your business right now. Looking at your profit rather than activity, and working out what you actually need. Every individual is different – so whether you need £5k or £105k income per month, work it out, set the goal and go get it 3) Stop comparing yourself to your competition – this is your race and you are winning. You have no idea what numbers your closest competitor needs to achieve to be a success, focus instead

on what success looks like for you. If you are part of a network or mortgage club who send out league tables, read them if they motivate you – but stop if they don’t, and be happy with your decision.

4) Be social – if social media, Facebook, Twitter or Instagram forms a central part to your business, then make sure you continue to do this – remember, the point of social media is to be social. Think about the type of posts which are important to your clients and consider talking about success stories rather than highlighting the number of lenders which have reduced their lending capacity – your social media posts are your opportunity to build confidence in YOUR market 5) Do the basics – we all know it, and some will or won’t have done it – this is about getting under the skin of your client bank (however large or small) and looking for opportunity.

Life Insurance, Home Insurance, Remortgage – and it doesn’t stop there. Ask for social proof (reviews) on business that has completed in the last 6 months, launch a referral scheme and offer support – your clients will remember you being there long after this virus has gone.

6) Have a plan – from a one day plan, seven day plan, 30 day plan right up to a 90 day plan… At some point we are going to exit this current parallel universe and normal will return. Its important to make sure you are ready to THRIVE 7) Enjoy your daily exercise (assuming it still exists at the point this goes to print) – its important – your mental health will be better for it and your business no worse So to all you thrivers out there.... I’ll see you on the other side. M I

Out of the woods: Its important to make sure you and your business are ready to thrive

APRIL 2020 MORTGAGE INTRODUCER

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REVIEW

FIRST-TIME BUYERS

Exploring untapped market potential Anita Arch head of mortgage sales, Saffron Building Society

T

he fact that many first-time buyers are struggling to get a foothold on the property ladder is nothing new.

Raising a mortgage deposit, in addition to budgeting for the upfront costs associated with buying a house, can be difficult for many people – especially those who currently find it tough to balance saving with meeting their existing living costs.

In fact, a recent study by homeless charity Shelter found that almost twothirds (63%) of private renters in the UK have been unable to save anything towards a deposit on their own home.

So, the cycle continues; many potential first-time buyers are being prevented from taking their first steps on the property ladder because they cannot afford to save up for a deposit.

Of the proportion who are able to come up with enough cash, the majority would not have been able to without family, and most often parental, support.

Yet not all families are financially able to provide thousands of pounds to help their loved ones come up with a deposit, even if they would be willing to do so.

However, on the flip side, recent data shows that first-time buyers now represent the largest share of the mortgage market, accounting for more than 50% of all homes bought with a mortgage in 2019.

This is significantly higher than in 2008, when the proportion stood at just 38%, and is at the highest level for 25 years.

It is clear, then, that first-time buyers represent a significant commercial

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opportunity for lenders, and we can logically assume that the market would open up even further if the mortgage process was made more affordable for these individuals.

Surely, those providers that are not willing to think flexibly and offer affordable first-time buyer mortgage solutions are missing a commercial trick, and most importantly to us, an opportunity to help more get onto the property ladder.

ADDRESSING THE BARRIERS

Here at Saffron Building Society we certainly think so. We’ve set out to help those in this situation, with many of our mortgage products offering a 95% loan-to-value ratio, allowing people to get on the property ladder with just a 5% deposit.

We’ve also designed a range of products specifically designed to help first-time buyers get onto the property ladder, by addressing some of the common barriers they may find are preventing them from doing so.

The Family Support Mortgage, for example, gives first-time buyers the opportunity to make use of funds

First-time buyers often require a degree of flexibility

supplied by a family member, which will need to be invested with Saffron Building Society for five years. This gives the applicant access to a lower mortgage rate. The applicant is also required to put a 5% deposit towards the purchase of the property.

Our exclusive product for intermediaries, the Joint Borrower Sole Proprietor mortgage, also takes advantage of new and more competitive interest rates.

Taking the income of a supporting applicant into account, to boost the primary applicant’s affordability, the borrower can use this product to significantly increase their chances of being accepted for a mortgage.

Payments are taken from a sole account, and both applicant and supporter are jointly responsible for the mortgage, allowing the makeup of the payments to be agreed between them.

As well as launching new products, we also support first-time buyers by offering a range of incentives to limit the additional upfront costs they need to pay when purchasing a house – again making the process more affordable and more accessible.

These incentives include free valuations and the removal of arrangement fees, as well as a wealth of mortgage advice articles and videos on our website.

Finally, this support extends to our personal approach, which prioritises human interaction in customer service.

Our dedicated business development managers are on hand to support any questions you may have regarding your client’s criteria and affordability.

As an industry, it is vital that we understand the difficulties facing many first-time home buyers, as well as listening to both consumer and broker feedback, and taking clear steps to enhance our offering so that we are equipped to cater to the ever-evolving needs of first-time buyers.

Only then can we truly offer the outstanding, comprehensive support that first-time buyers need to help them get on the property ladder.

By not doing so, not only are lenders missing a commercial trick, they are letting down a generation of cash-poor potential property owners. M I www.mortgageintroducer.com

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REVIEW

SHARED OWNERSHIP

Shared ownership needs support Stuart Miller customer director, Newcastle Building Society

T

he UK’s property market is this country’s single biggest economic driver, and that’s why housing policy is so important. At the time of writing, we are in national lockdown; the impact on this market is largely unknown, but it is likely to be transformative.

One thing is certain: people will still need homes to live in, and different ways of supplying the help to do this will remain important if we are to emerge and rebuild from this crisis.

Two means of help to date are affordable housing and shared ownership, particularly through the Help to Buy scheme.

In practice, many governments find it hard to do anything very radical when it comes to housing policy.

The payoffs are too long-term and credit can go to opposition parties, rather curbing the immediate political will of the incumbent government to invest in increasing the provision of homes at the scale required. Fiscally, things have been in a bit of a stalemate when it comes to residential property; the most recent Budget failed to address many of the justified concerns raised by the industry around Stamp Duty’s role in holding transaction activity back.

Policy-wise, there remain schemes in place designed to support increased building of new homes for both rent and sale. However, the Help to Buy scheme and money available to housing associations to provide homes for shared ownership have remained relatively untouched.

While all government support for the housing market is welcome, sometimes policy does need to be reviewed and adjusted. The Help to Buy scheme has been hugely successful at getting people onto the housing ladder in

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the first instance; when it comes to remortgaging and staircasing the share of equity up, however, homeowners’ options are still very restricted.

The same is true of those who bought into shared ownership properties with the help of a housing association.

While these schemes are brilliant at establishing a person entering home ownership without the kinds of deposit that can really only be attained through inheritance, gifting and saving in very high paid jobs, they are very inflexible after the first few years.

According to the Office for National Statistics, England has seen a large change in the composition of affordable homes delivered since 2010, with a shift from social rent to other submarket rent homes. Meanwhile the number of new shared ownership and shared equity dwellings has fallen.

In Scotland, while social rent remains the main type of affordable home delivered, its share has also fallen.

There has been a shift to sub-market rent north of the border too, but also a small increase in shared ownership and shared equity.

In Wales, shared ownership and shared equity has fallen as a proportion of affordable housing provision.

Northern Ireland has seen the least change in composition.

While there is no empirical evidence that the failure of shared ownership and shared equity to really take off is because of its financial inflexibility long-term, the evidence on the ground Social Rent

is that many potential buyers are put off for this reason.

Currently, shared ownership is available from housing associations, with the buyer purchasing between 25% and 75% of the value of the home and paying rent on the remaining share.

Buyers are permitted to increase their share over their lifetimes, as and when they can afford to. How much equity they get is linked to the value of the property when they staircase and purchase extra equity.

Right now, the vast majority of housing associations will only allow buyers to staircase up in increments of £10,000. The fees associated with the purchase of additional equity tot up to around £2,000 each time.

Given that those who tend to buy into shared ownership have done so because they have struggled to build up a big deposit and/or to pass affordability tests for a large mortgage, the idea that at the end of a 5-year mortgage fix when it comes time to refinance their loan they will have £12,000 sitting around to staircase up is perhaps unrealistic in most cases.

People manage their money in all sorts of ways, but most of us save little and often, topping up when we have the odd bonus or receive an inheritance..

Affordability takes many forms and should continue to do so, that’s why we are actively looking at how to support more borrowers seeking more flexibility from shared ownership. M I Other submarket Rent

Rent to own

Shared ownership/equity

England YE March 2011

64.76

0

7.4

27.84

England YE March 2018

13.65

57.99

1.72

26.62

Scotland YE March 2011

80.71

0.8

0

18.49

Scotland YE March 2018

61.71

13.28

0

25.02

Wales YE March 2011

80.36

4.2

0

15.44

Wales YE March 2018

79.08

12.07

0.51

8.34

Northern Ireland YE March 2011

74.12

0

0

25.88

Northern Ireland YE March 2018

65.24

0

0

34.76

Source: ONS

www.mortgageintroducer.com

REVIEW

EDUCATION

Providing certainty in uncertain times Rory Joseph director and

Sebastian Murphy head of mortgage finance, JLM Mortgage Servixes

A

t the time of writing, the UK has just been placed into a lockdown – the inevitable consequence of the coronavirus spreading, more people contracting the illness, and sadly dying from it.

Working from home and/or remotely has become (we hope) a natural part of your working existence and, given the need we have in this country to do everything we can to stop the spread of the virus, that seems like a small sacrifice worth making.

In a sense, we are fortunate in the advice sector because we can continue to work with our clients, regardless of whether we need to see them face to face or not.

Indeed, many advisory practices will only have a small number of clients they ever met in person anyway, and we have all been able to provide the rest of our clients with all their advice needs over the years.

FACE-TO-FACE

That will continue, and should be a situation that is now the same for all clients. We read recently of calls to stop face-to-face meetings with equity release or later life lending clients; this demographic is probably the one most likely to want to see the whites of an adviser’s eyes, but given the circumstances, there is no reason to be seeing any client.

What we are genuinely fortunate to have is the opportunity to carry on providing advice to clients at a time when the need for advice is probably at its greatest.

The huge raft of measures announced www.mortgageintroducer.com

by the government to help businesses and employees was very welcome, but it won’t necessarily stop many clients worrying about their futures and their ability to continue paying their bills, including their mortgages.

Introducing a three-month payment holiday was a solid step, but it will still be mis-understood by some borrowers who, quite frankly, don’t engage with their mortgage as perhaps they should.

We who work in the sector believe it to be the most important financial commitment; we must face the fact that many individuals do not feel the same way about it, although that is likely to change.

DIFFERENT BORROWERS

There will have been many borrowers over the past few weeks who won’t have known what a mortgage holiday actually is; they won’t even be able to tell you who their lender is, what rate they’re on, or what term they have left.

At the same time, they won’t have known whether their special rate is coming up for renewal, and they certainly won’t have considered whether by taking a mortgage payment holiday now, they would be jeopardising their ability to secure a product transfer or remortgage in the short-term future.

Of course, there are also plenty of borrowers who will know all of the above and much more; they’ll have been the ones contacting their lender and adviser as soon as the announcement was made.

They’re the ones who see a significant cut to Bank Base Rate and are quick to enquire whether this means they can get a better rate or not, and they’re certainly the ones who called or emailed us when they realised that they may well need to do something about their mortgage payments in the short-term, and (given the nature of this crisis) that they were

not as protected as they should be.

Understandably, life cover has become something of a must-buy product recently.

But, as mentioned, there will be other clients of yours who may feel that this will not truly impact them – that it will all be over at some point and that it doesn’t (at least not yet) require them to do anything.

“If we think the virus is going to allow us to write huge amounts of business over this period, then we’re seriously deluded” Of course, that might be true, but it would be far better if they made this decision on the back of an adviser reviewing their needs and circumstances, looking at what their lender could offer them, and making the decision from a point of knowledge.

There have been some rather distasteful suggestions about the ‘opportunity’ that coronavirus presents – a Labour politician suggesting this could be the making of Labour, ‘investors’ and disaster capitalists shorting everything in sight to make a considerable quick buck – and of course, if we all think the virus is going to allow us to write huge amounts of business over this period, then we’re seriously deluded.

But, what it does do is give us the opportunity to provide a degree of certainty and peace of mind to our clients who may well be scared and are looking for a professional to (at the very least) consider their mortgage needs and provide them with a solution that can last for the short-term.

That’s what we can all offer, and we’re sure everyone in our sector has been doing this already – to that end, let’s broaden our message to all borrowers about the importance of advice, and the services we can offer.

It’s an important one to put out there and could make a big difference to a lot of people. M I APRIL 2020 MORTGAGE INTRODUCER

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REVIEW

HIGH NET WORTH

A closer look at UHNW refinancing Peter Izard business development manager, Investec Private Bank

E

xpanding a large property portfolio is never easy. Every investor has different goals, and securing the necessary finance to quickly take advantage of market opportunities when they arise requires a lender that looks at the bigger picture.

Our more holistic approach recently enabled us to find the right mortgage solution for two ultra-high-net-worth clients who sought to optimise their existing property portfolio while also raising capital for further investments.

Investors have faced various obstacles across both the residential and commercial property markets over the last three years.

On the residential side, the Prudential Regulation Authority made significant changes to buy-tolet rules in 2017, wich included the introduction of tougher lending criteria.

As a result, 70% of portfolio landlords with ownership of four or more mortgages claim it is now more difficult to obtain finance.

The volume of UK commercial property transactions has also slumped by 46% in the second quarter of 2019, when compared with the same period in the previous year.

The ongoing uncertainty surrounding Brexit and a decline in the retail sector have been identified as the primary causes.

However, the best investors will see opportunities where others hesitate.

Indeed, many property portfolio owners have looked at selectively expanding their residential holdings since the PRA increased regulation.

Securing finance can still be tricky, though, even for UHNW individuals,

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MORTGAGE INTRODUCER APRIL 2020

particularly those with complicated requirements. Here at Investec Private Bank, we recently used our knowledge of the UK property market to deliver a bespoke lending solution for two UHNW business partners with very specific needs.

THE BORROWER

Our clients were ultra-high-net-worth business partners with a substantial property portfolio across the South East of England. Their investments were comprised of residential, commercial and mixed-use properties.

THE PROBLEM

The clients’ investment goals are complex and ever-evolving.

They originally hoped to refinance an existing lending arrangement for the current portfolio, while also raising £2m to fund new purchases and provide the necessary capital to refurbish one of the properties.

Subsequently, they found a mixed-use residential and commercial property block they wished to purchase, which meant obtaining a new mortgage in addition to the refinancing agreement.

The borrower had also implemented

a shared Family Investment Company, with which to develop assets for their children.

The clients’ existing lender had been unable to structure the existing portfolio mortgage to allow the business partners to raise enough funding for further purchases.

We were only too happy to step in and assist.

THE SOLUTION

Investec Private Bank has extensive experience of navigating the complex mortgage requirements of UHNW clients with sizeable property portfolios.

Our familiarity with the unique challenges high-net-worth clients face enabled us to refinance the portfolio mortgage to create essential extra funding for their expansion ambitions.

Furthermore, the additional mortgage for the residential and commercial property block needed to be partially financed by the refinanced loan.

Investec Private Bank was ultimately able to help two UHNW business partners overcome several key obstacles as they looked to expand their growing property portfolio.

By listening to our clients and understanding their unique needs and financial circumstances, we used our extensive knowledge to deliver lending solutions that satisfied each element of this multi-faceted mortgage problem. M I

UHNW clients with sizeable property portfolios have complex mortgage requirements

www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Finding answers in stressful times Ying Tan founder and chief executive, Dynamo

A

t the moment it’s tough to know what the next day will bring, or where to start when focusing on a particular sector when there is so much pain, suffering and uncertainty in the air.

But as I’ve said in other similar pieces, and will continue to do so unless advised otherwise, it’s business as usual for us and for everyone else in the buyto-let market where possible.

The mortgage market and the private rented sector remain vital components within the UK economy, and the past few days have seen an unprecedented response from the government and lenders to help support borrowers.

Further to the Chancellor’s announcement regarding the mortgage industry’s support for homeowners who are experiencing financial issues due to COVID-19, lenders representing banks, building societies and other specialist lenders have come together to announce additional support for homeowners and residential landlords.

These include extending the option of a payment holiday of up to three months to residential buy-tolet landlords with tenants who are experiencing issues with their finances, as either a direct or indirect result of coronavirus, as well as a three month moratorium on residential and buy-tolet possession action to start from 19 March 2020, helping provide customers with reassurance that they will not have their homes repossessed.

These are certainly welcome steps in the right direction, although I would add that the devil will be in the detail when it comes to individual lenders.

Getting good, professional advice will www.mortgageintroducer.com

help ensure that homeowners, landlords and tenants get the answers and solutions they need in these stressful times. Now, back to the ‘business as usual’ theme, let’s take a look at some other recent BTL-related news.

LANDLORDS

Half of UK landlords plan to exit the private rented sector in protest against increased regulation and cuts to lucrative tax reliefs.

The findings of Aldermore Bank’s buy-to-let research suggest that 48% of landlords are considering selling their portfolios and abandoning the letting market. More than a quarter (28%) of respondents said that regulatory change was the biggest threat to their investment, while others cited tax changes (33%) and high maintenance costs (28%) as barriers.

Almost half (49%) of landlords said the stamp duty increase has stopped them expanding their portfolios.

Three in five (59%) forecast the ban on letting fees will result in landlords raising their rents due to the increased costs put on them. Increased admin was another complaint, with two in five (40%) saying more rules meant their most recent mortgage application was harder to make than previously.

As a result, nearly three in five (59%) landlords say it is much harder operating in the rental sector now than five years ago.

However, despite these pressures, the research goes on to suggest that more than half (52%) of landlords would still recommend the BTL avenue as a good investment opportunity.

TENANT DEMAND

Demand from prospective tenants in January increased to the highest level on record, with 88 prospective tenants registered per branch compared to 56 the previous month, according to ARLA Propertymark’s latest Private

Rented Sector report. This equates to agents witnessing a 57% increase in the number of prospective tenants registered since December.

Year-on-year, demand for rental accommodation was reported to have increased by a fifth (21%). The number of properties managed per branch fell from 206 in December to 191 in January. Supply has not been this low since July 2019, when it stood at 184.

This is a worrying gap for tenants, especially with so many professional landlords having to evaluate their investments and growing numbers adjusting their portfolios to include some higher yield options such as houses of multiple occupancy and short-term lets. Neither of these reports make for easy reading, but it is information that we need to hear, qualify and react to.

TECHNOLOGY AND IMPROVED PROCESSES

The Mortgage Works is reported to be improving its processes to enhance the application process for brokers and landlords looking for further advances and rate switches. These changes mean that anyone with a TMW buy-to-let mortgage who wants to borrow more and switch to a new rate can now apply for both at the same time.

Paragon has unveiled phase two of its intermediary portal, adding new features to enable brokers to manage customers’ applications more effectively. Additions to the portal’s functionality include the introduction of an alerts service to keep brokers informed as their application moves through the process. Brokers can choose to receive alerts via either text or email, how often they receive alerts and exactly what updates they receive.

Technology, data, analytics and science will play a huge role over the next few months in helping the world to better understand and combat what is one of the most serious threats seen within our generation. These are also vital in allowing intermediary firms to continue engaging with clients and finding the best solutions to meet their needs, however swiftly these might change. M I APRIL 2020 MORTGAGE INTRODUCER

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REVIEW

BUY-TO-LET

We must keep things functioning Bob Young chief executive officer, Fleet Mortgages

W

riting this in advance of the April issue of Mortgage Introducer has understandably been somewhat difficult. Indeed, by the time you read this, the situation with regards to the coronavirus and the measures that have been put in place are likely to look very different.

For that reason, and with the full knowledge that this is the number one concern for people and that other topics may seem slightly less important, I think it’s still important to look at a mortgage market-related subject because we all need to ensure that the market continues to function.

Hopefully this will be a short-term situation, and we can return to ‘normal’ sooner than some are anticipating.

KEY DRIVERS

Having said that, I’m also fully aware that by the time you read this, events will have moved on at some pace, but my belief is that there are key drivers of our market which will remain in place, whatever we go through over the months ahead. One of those is clearly the requirement for a place to live and in terms of demand for private rental property, that will be a fundamental.

In February, Arla Propertymark released some statistics around tenant demand, suggesting that letting agency branches (at the end of January) were seeing a record high of 88 prospective tenants per branch, but conversely the number of properties that were available to them had fallen to a seven-month low. Now, given what has happened in the past couple of months, we might all be looking at such

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MORTGAGE INTRODUCER APRIL 2020

statistics with a pinch of salt; however, we should not underestimate their strength or veracity because, although they point to a trend which might change somewhat during the middle of 2020, you would anticipate that it will remain for the medium to long-term.

That being the case, what is likely to be the upshot of this? Well, clearly when tenant demand outstrips the supply of properties, the likelihood is that rents will rise. The measures that have been brought in over the past few years, which were designed to move landlords with smaller numbers of properties out of the market appear to have worked.

Perhaps this worked too well, because one thing the housing market cannot stomach is a shortage of private rental property supply. And will more landlords take their leave of the sector?

Well, that remains to be seen. Actually, when you look at the investment returns then property appears to be a sound bet.

This might well lead those who were considering selling up to stay put, and it could well mean that landlords might seek to add to portfolios. Again, this comes with the notable caveat about viewing and buying property at a time when vendors might not be willing to put homes up for sale and the logistics are still somewhat unknown.However, landlords are still likely to sell to other landlords, and vacant properties can also be purchased. The point is whether we’ll see enough properties being available in the private rented sector to meet demand, and the answer – at this stage – has to be no.

In last month’s post-Budget planning announcement, the government appeared to reiterate its commitment to remove Section 21 evictions, but again with the political situation changing quickly, how much of a priority will this be? It is due to be part of a Renters Reform Bill, but no date was given for

its introduction, and you might believe that the entire government has far bigger fish to fry now.

In my opinion, this would be no bad thing. While abolishing Section 21 on its own would clearly have an impact on property supply it would not be utterly catastrophic.

However, if the government feels it needs to act to curb rising rents with the introduction of rental controls, then these two measures combined would I’m afraid see large numbers of landlords feeling they need to exit.

RENT HIKE

As it is, that is not the situation that’s currently playing out, and landlords might currently feel, given the increase in the cost of letting their properties out and the strong demand, that a hike in rents might be justified in order to cover that rise. Certainly, landlords have been seeking to increase yields or profitability through a variety of approaches – opting for higher-yielding properties such as houses of multiple occupancy and mutli-unit blocks, turning single tenancies into multiple ones, refinancing to more competitive rates, purchasing (and housing) property within limited company vehicles to benefit from full tax relief.

In that sense, landlords continue to need professional mortgage advice.

Purchase activity could be subdued over the next few months, but landlords’ deals will still be coming to an end presenting remortgage and product transfer opportunities, plus there will be some who feel now is the time to add to porfolios.

The requirement for advice does not go away, and it will be vitally important that you provide these clients with every choice as to how they can conduct their mortgage finance through you.

Let them know that working from home or remotely still means working.

They will be doing the same and will need to keep those wheels turning.

Make sure they know you’rwe the one to continue to support them and that the mortgage market has not closed down by any stretch of the imagination.

We will be here for you, make sure you’re there for them. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Guiding clients through tough times Jeff Knight director of marketing, Foundation Home Loans

A

s we continue to operate in unprecedented times, the residential and private rented sectors will come under even more intense scrutiny in the wake of individual financial circumstances.

Thankfully, everyone is trying to work together to find solutions.

How these will pan out remains to be seen, but suffice to say that all lenders are assessing how and where we can support the most vulnerable homeowners, landlords and tenants.

Whilst it’s difficult to ignore what’s happening around us from a health perspective, it’s also important to maintain a grip of current market conditions and ensure we stay in touch with not just loved ones but also clients.

Working in the industry, we have a better sense of announcements, but clients may need help and guidance to navigate these tough times. What is clear is that we do not know what life will look like in the future. Will things go back to how they were? I doubt it.

LOOKING BACK

As the world of football has ceased, I find myself looking at old matches to remind myself what the game was like before it stopped. With this in mind, I thought I would touch on what the buy-to-let market was like pre-crisis.

To begin, let’s focus on one area more and more landlords are zoning in on as the needs of the rental population changes. As a lender we have seen a surge in interest from landlords who are looking to diversify their portfolios. Yields, rental voids and cost implications are obviously playing a major role within this, so it’s little www.mortgageintroducer.com

surprise that a growing proportion of professional landlords are looking to bolster their house of multiple occupancy investments.

Gone are the days where these were confined to student accommodation and stereotypical grubby bed-sits.

This is an area which has greatly improved from both a tenant and landlord perspective. Stronger regulatory measures have resulted in improved standards.

Properties are now being better designed for communal living and providing comfortable, cost-effective solutions for tenant of all ages. Of course, this area of the buy-to-let market is still far from perfect but forward strides are certainly being made and a growing number of landlords are realising this.

But don’t take my word for it, let’s look at the data. A decent proportion of the recent Q4 2019 Landlord Panel research from BVA BDRC was dedicated to HMOs. It highlighted this to be the 4th most popular purchase target. When asked which type of property landlords are intending to purchase, 52% responded that terraced properties remained the most attractive target. One in four landlords were suggested to be looking to acquire an HMO, whilst only 11% of landlords intended to divest this type of property.

The portfolio profile remained largely unchanged in Q4, with terraced houses continuing to be most common help property with portfolios, but it’s also evident that portfolio diversity is increasing in line with size. Landlords with 11+ properties were reported to be holding an average of 3.2 different property types in their portfolio, compared to the 1.8 held on average by those with 10 or fewer. HMOs were highlighted as playing a vital role within this, especially at the higher end of the professional landlord scale.

On a regional basis, the incidence of

HMOs was suggested to be highest in the North West and Wales, with 29% of landlords owning this property type in these regions.

This was followed by the South West (27%), West Midlands (26%), North East (23%), South East (excluding London) (20%), East Midlands (19%), East of England (17%), London (Outer) (16%), and Yorkshire and the Humber (16%), with the lowest being Central London (13%).

Property-related costs have played a massive role for landlords over the years, but recently there has been increased scrutiny surrounding these.

LANDLORD COSTS

According to the report, on average, landlords spend around 20-30% of their gross rental income on running and maintaining their properties.

When it comes to HMOs, inevitably landlords spend a slightly higher proportion of costs on running and maintaining this property type – around 28% of their gross rental income. In comparison, landlords were said to spend around 23% of their gross rental income on running and maintaining non-HMO properties.

Landlords with 20+ properties claim to spend the highest proportion of their gross rental income on maintaining non-HMO properties (30%).

At the top of this costings list is property upkeep, repairs and maintenance which comes in at 28% of total expenditure.

Making up the top five slots of landlord outgoings are: any other costs associated with renting out the property (23%), property management and letting fees (10%), service charge (9%) and joint fifth are ongoing regular servicing (cleaning, gardening) and accountancy or professional services fees, including legal representation (5%). It’s important for landlords to realise that these costs must be viewed in relation to rental yields and how these are balanced across their portfolios.

The value attached to the advice process also continues to play a major role in this balancing act for landlords.

These are unprecedented times. Let’s stick together. M I APRIL 2020 MORTGAGE INTRODUCER

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REVIEW

BUY-TO-LET

Listening to landlords Jane Simpson managing director, TBMC

A

s everyone in the UK is adjusting to the societal changes being imposed due to COVID-19, landlords will also be considering the financial impact on their buy-to-let businesses.

The government has announced emergency legislation providing protection for renters, meaning landlords cannot start eviction proceedings for at least a three-month period during the national crisis.

These measures are designed to protect tenants who are struggling to pay their rent and prevent people from becoming homeless during this unsettling time.

There is also protection in place for landlords, whereby lenders may offer them a three-month mortgage holiday for those whose tenants are experiencing financial difficulties as a result of coronavirus.

The measure will be welcomed by landlord organisations such as the National Landlords Association and Residential Landlords Association, which have asked the government to be supportive of landlords. However, there doesn’t appear to be any specific help for landlords who don’t have mortgages but may also suffer financially during this period.

The NLA and RLA also issued a joint statement encouraging landlords to be supportive towards their tenants: “Landlords should be as flexible as they can to help tenants facing payment difficulties resulting from the impact of the coronavirus.”

The coronavirus crisis coincides with the final removal of mortgage interest tax relief for landlords, which has been phased out in stages since 2016.

This has impacted higher rate taxpayers most of all and may push previous basic rate taxpayers into the

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MORTGAGE INTRODUCER APRIL 2020

40% banding. No doubt all landlords are concerned about the financial consequences of coronavirus over the coming months.

SECTION 21 AND REMOVAL OF ASTS

Since last year, UK landlords have been campaigning against the abolition of Section 21, which currently allows landlords to apply through the courts for a no-fault eviction should they wish to take possession of their property for any reason.

Section 21 is still expected to be scrapped, although the exact timeline is unclear, but it will leave landlords only able to end a tenancy where they can prove they have legitimate grounds under Section 8 of the Housing Act. A Section 8 claim involves a formal court hearing and the median time for this process to complete is 16 weeks, so landlords are asking for legal proceedings through the courts to become more efficient.

In tandem with abolishing Section 21, the government is also planning to remove the Assured Shorthold Tenancy which would mean that assured tenancies are the only type of tenancy available to landlords. At buyto-let finance meetings with landlord groups around the UK attended by TBMC, landlords have been asking how the removal of ASTs will impact buy-to-let lending criteria. So far there has been little indication from lenders as to how they will react to this change in the rental sector, but it would be good to have an idea.

the underlying strength of the private rented sector in the UK and indicates that many buy-to-let investors look at it as a long-term prospect.

Larger professional landlords may be better able to adapt to changing circumstances with a more diverse portfolio and look at other options for higher yielding properties, such as houses of multiple occupancy or multiunit blocks.

“The government is planning to remove the Assured Shorthold Tenancy which would mean that assured tenancies are the only type of tenancy available” They may also look at geographic regions further afield to take advantage of better performing areas of rental accommodation.

Certainly, at TBMC we are experiencing a continuing demand for more specialist mortgage products that are aimed at complex property scenarios and professional landlords with expanding portfolios. The experienced buy-to-let investors we talk to are often surprised that more lenders don’t provide mortgages to larger portfolio landlords as they perceive themselves to be a better risk than someone with three or less properties and are often irked if they have to pay higher rates.

LOOKING AHEAD

PORTFOLIO LANDLORDS

Although the various changes in the buy-to-let sector over the last 5 years have resulted in some landlords selling up, there has been little sign of larger portfolio landlords looking to exit the market in significant numbers.

A recent survey by Moore shows that the number of landlords with a portfolio of 10 or more properties has remained constant over the last couple of years, at around 43,000. This seems to show

It is difficult to look too far ahead as we are all currently experiencing unprecedented events and it is unclear how long emergency measures will be in place in UK. However, it is also an opportunity to show solidarity and support for each other, so it may be a good time to touch base with landlord clients to see how they are coping and perhaps offer some refinancing solutions which could help them through this unsettling time. M I www.mortgageintroducer.com

REVIEW

PROTECTION

Pandemic protection Kevin Carr chief executive, Protection Review, and MD, Carr Consulting & Communications

L

ike almost every other part of the economy, coronavirus (COVID-19) has had a huge impact on the protection market. Some of this has been positive for the sector as during times of crisis people often appreciate the true value of protection. This was reflected by the surge in protection sales throughout most of March, especially in income protection (IP). As of 18 March, technology provider iPipeline saw a 47% rise in policy applications for IP compared with its mid-February benchmarking position and a staggering 185.9% overall year-on-year increase.

In particular, applications for IP with deferred periods of four weeks or less grew by 102% compared to midFebruary.

Applications for critical illness (CI) and life insurance were up 8% compared with mid-February and all protection applications were up 106% year-on-year. Mortgage brokers have played a key part in driving

this activity, and it’s likely they will increasingly turn to protection as the mortgage market comes to a standstill because of the disease.

However, iPipeline saw a slowdown of applications towards the end of March as providers applied changes to their products. Some insurers have added exclusions, stopped requesting medical evidence, added underwriting questions and started to postpone applications due to the COVID-19 crisis. This has led to a degree of confusion about what is and isn’t covered for both existing and new customers. Industry groups have been trying to provide clarity and ensure consumers understand what’s included with each policy, however, it’s also incumbent on advisers to keep up to speed with developments so they can give their clients the right advice.

Protection Guru provides up-to-date information on changes by providers, so it’s worth checking out its website to stay in the loop.

What’s clear is that this is a constantly changing situation and providers are looking at how best to protect their current customers and ensure their businesses stay resilient and sustainable during the crisis and beyond. M I

The true value of added value

A

dded-value services have come into their own during the course of the crisis, providing much needed support for customers and helping reduce pressure on the NHS. Many life insurance and income protection policies provide free additional health services, such as access to virtual GPs, mental health support and counselling, fitness programmes and information on healthy living.

Virtual GPs in particular have helped people wanting to get advice about coronavirus while at the same time supporting people with other illnesses who need consultations they are www.mortgageintroducer.com

currently unable to get face-to-face on the NHS. It’s also likely that mental health services will be increasingly used as the strain of self-isolation starts to take effect.

Advice firm Drewberry has put together a helpful and comprehensive list of insurers and the health services they provide.

The guide includes information on British Friendly’s Mutual Benefits programme, AIG’s Smart Health, Bupa’s Babylon healthcare app and The Exeter’s HealthWise programme among others.

The guide is aimed at consumers but it’s also a useful resource for advisers.

NEWS IN BRIEF WPA has given its large corporate, small-to-medium enterprises retail customers and staff unlimited access to Medical Solutions’ remote GP service.

Alan Knowles, chair of the Protection Distributor’s Group, has joined the executive committee of the Income Protection Task Force.

Royal London updated its CI cover and children’s CI cover, including removing the drug and alcohol exclusion, combining several definitions to provide simplicity and adding a new conversion option to its enhanced children’s CI cover.

PRIMIS Mortgage Network has added Shepherds Friendly to its panel, increasing the range of income protection and over 50s life insurance solutions available to its advisers.

LifeSearch’s annual results revealed the company’s turnover, gross profit and EBITDA grew by 28%, 29%, and 53% respectively in 2019.

Aviva has renewed its partnership with Santander to provide life and home insurance to the bank’s UK-based customers.

Drewberry has sent the information to its clients and is encouraging others to share it more widely.

“The general feedback from our clients has been overwhelmingly positive, however, there are far more people out there with these policies who aren’t our clients,” says Tom Conner, director at Drewberry.

“That’s why we compiled this page as a resource to share so we can all do our bit to take the pressure off the NHS where we can.

“As such, we would like people to share this guide as appropriate so that anyone with a policy with any of these insurers are aware of the free to use health benefits they have access to and know how to use them.” M I APRIL 2020 MORTGAGE INTRODUCER

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REVIEW

PROTECTION

Protection can add real value right now Mike Allison head of protection, Paradigm Mortgage Services

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ife assurance needs to be sold not bought’ – not at the moment it doesn’t.

I am sure that many involved in our industry have heard this phrase time and time again. ‘People don’t wake up in the morning and think about buying life assurance’ is another old favourite.

Well, in the situation we find ourselves in at present, this does not appear to be the case.

In a number of discussions I’ve had with insurers over the past few days, most have indicated an increase in activity; for those dealing with our friends, the aggregators, clearly some of the uplift in activity has come from them.

In one way this is a positive, in that they have established themselves as a go-to place for all types of insurance, and hopefully many people will have had the opportunity to purchase much-needed cover; cover which was probably needed regardless of the pandemic.

Likewise, it is to be hoped that many of the independent call centres working in our market are also supplying a fine service to customers, although there will always be exceptions to this.

So why now? Is there a sudden realisation of vulnerability from a health perspective? Is there a sudden realisation that ill health could cause a major issue financially?

In reality, these risks have always existed regardless of the coronavirus.

The key issue could be said to be the extent of the epidemic and the profile it is has clearly and quite rightly attracted. People are being blatantly

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MORTGAGE INTRODUCER APRIL 2020

made aware of the risk and their own vulnerability, and want to do something about it now.

Many quality mortgage advisers will do their utmost to recommend life assurance in its various guises when helping their clients move, remortgage or simply get a better deal, but there are those who do not for a number of reasons. Many such reasons have been debated in columns like this for years, and it is not the intention to repeat them here.

However, what we can deduce from the current scenario is that if customers are made acutely aware of risks that do exist, they may not take the easy route out of the sale of protection by saying ‘I’ll do it later’ or ‘I’ll get funded from the state.’

Indeed, given the current profile around Universal Credit, I sincerely believe that many have been forced to realise just how inadequate the state provision is.

So, in focusing on the positives, even after this situation has come and gone, customers may be more aware of the need for insurances to cover their

The need for cover existed before the crisis

liabilities through any of the three main forms of life assurance we distribute.

But it isn’t just new customers we can help. Many brokers will have recommended policies to clients that, now more than ever, can have an immediate usage, even if the policyholders themselves have not contracted the virus.

All of the major insurers offer support services as part of the life assurance package brokers have recommended.

Access to 24/7 GP helplines and mental health support could not be needed more at this time. After all, people will get non-COVID-19 illnesses and with the pressure on the NHS will value the opportunity to speak to, or Skype, a doctor.

Likewise, the strain placed on everyone during the lockdown will cause stress and potential mental health issues for many – the fact that they have an outlet to these as a result of buying their life cover from an adviser is something to be highly positive about in communications to clients at present.

There is no better time to contact existing clients who already have the life cover you have recommended and reassure them that these support mechanisms are something they have as a result of your recommendations.

At the same time, you can also reassure them that the cover they have will be sufficient for them if they contract the illness, even if the worst should happen.

I mentioned earlier about quality call centres doing a great job for some clients, but as in many aspects of our society there are always those who will look to exploit a situation.

One major insurer alerted us to a situation where customers were being called by one unscrupulous firm and told their life assurance would not pay out in the event of COVID-19 and to replace it with one they could offer there and then.

We know that at any time there are things we can and cannot control. We cannot control bad practice which gives our industry a bad name, but we can control speaking to clients and telling them the products they took your recommendations for are of real value to them right now. M I www.mortgageintroducer.com

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PROTECTION

Income protection or critical illness?

Ben Burgess senior protection adviser, LifeSearch

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aking out decreasing life and critical illness cover for the full amount and term of the mortgage is a tried and tested means of long-term illness protection.

It’s a classic in every sense of the word and has had a huge impact in the lives of countless policy holders.

But is critical illness (CI) cover always the best fit? What about the many UK workers whose company sick pay benefits aren’t enough, at one month of full pay or less? What

about the 15% of the population and rising who are self-employed? If these individuals don’t have substantial savings, they’re not going to be able to pay their mortgage.

Their injuries and illnesses are keeping them from earning money, but if they don’t meet the definitions of a critical illness outlined in their policy documents, they are significantly at risk. Even if they can pay the mortgage, via a CI policy or otherwise, can they afford to pay all the other bills as well?

According to the Office for National Statistics: “The four most common reasons for sickness absence in 2018 were either minor illnesses, musculoskeletal problems, ‘other’ conditions, and mental health conditions (including stress,

depression and anxiety).” More and more consumers are turning to income protection to meet their illness cover needs. They are drawn to the fact that they don’t have to meet a policy definition to continue to make their mortgage payments.

They also appreciate that it can be claimed upon as often as they need and essentially serves as privately funded sick pay. Income protection with a 1- or 2-year claim cap or age-costed premiums with Holloway and the British Friendly Society offer cost effective solutions for clients on every end of the budget spectrum.

Income protection is something people are investigating more than ever before. Most enquiries are coming from self-employed people or those who have low levels of company sick pay.

Are critical illness and income protection mutually exclusive? As advisers we know the answer to that question is a resounding no; however, it is our job make sure that clients are given all the options, not just the easiest one, or the cheapest. M I

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PROTECTION

How to stay ahead in changing times Jeff Woods campaigns and propositions director, Sesame Bankhall Group

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s I write this on 25 March, world events are changing by the hour as further announcements are made and new developments emerge. What the position will look like by the time you read this is anyone’s guess.

These are unusual times, when we can only ponder what things will change, and indeed, what we can count on to remain the same. I think these events could change our working practices for ever.

Meanwhile, many advisers are still adjusting to working remotely, whilst also working hard to ensure they keep writing compliant business in the current evolving climate.

We must find ways to support them in this transition, particularly those advisers who are not used to working remotely. From a consumer perspective, one of the thoughts that struck me is that people often react to a trigger event, such as serious illness or the death of someone close to them, as a reason to seek protection insurance.

This is human nature and perfectly understandable, but what’s unprecedented is that everyone is going through a similar series of emotions at the same time.

I believe that the outputs of this will

have significant implications. The only thing we’re unsure of is precisely what that will be.

At times like this we are likely to see the best and the worst of our industry.

All we can do as good professionals is to act responsibly and stick to the principles and behaviours of best practice developed over many years.

And if you hear or see any practices elsewhere that do not meet the required standards then report them immediately to the regulator.

It’s also important that we engage with our customers through this challenging period. It’s an opportunity to provide reassurance and keep them informed. Importantly, it will also help to manage any nervous clients who are at risk of making rash decisions, such as cancelling their policies and losing the valuable cover they have in place.

Don’t forget that there’s lots of information and support available from distributors and insurers to help you.

The COVID-19 support hub launched

by Sesame in March for the adviser community is one such contribution. M I

Is your knowledge of the protection sector a little cloudy?

Keep up to date with the latest protection news and developments at www.mortgageintroducer.com

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PROTECTION

Taking an interest Steve Ellis head of risk and protection, Premier Choice Group.

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ou don’t need me to tell you that the recent cut in interest rates to 0.10% is an unprecedented low. 2020 is making the 2008 crash look like a bit of a blip.

There will be many other priorities for individuals at this time. To have a bit of a bonus as a mortgage borrower is obviously good, but any funds freed may well be needed to cover other liabilities, especially if a client’s income is at risk.

Let us hope there is income protection in place and that it will pay out in the event of job loss due to the coronavirus outbreak.

How many borrowers will benefit from the rate cut is debateable – clearly it will help those on variable rate deals.

As their mortgage broker you will be all over any options your clients may have for getting a good mortgage deal or remortgaging to a better rate. But as a healthcare intermediary, we would be

looking to help them see what options they have to maximise the protection they have around their liabilities and their finances.

It is hardly the time to be profiteering – I am not sure anyone has much chance of that – but there is a moral value to be had in highlighting how much easier these times will be for people if they have what is important to them as well secured as it can be.

Income protection providers are inevitably putting coronavirus on the exclusion list as to what is covered under their policies. This is understandable, frankly.

It is for us to present to clients the thought that if they regret not having protection cover they consider it now for the future, taking exclusions on, but giving them some reassurance for anything else.

It may well be that clients need that amount of money they save on their mortgage for more pressing items such as food or paying bills. Or it could be that they are open to a conversation as to whether some of it could be used to get some measure of protection. It may not be as costly to have it as they think, but not to have it could be very costly MI in the future.

Critical flexibility

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criticism often levelled at insurers is lack of flexibility, and almost an assumption that they won’t pay out. Of course, no one takes out insurance on that assumption, but it helps to see that insurers are trying to improve offerings. Each time, it is an opportunity to raise the idea with clients of what protection is out there.

One that will resonate with parents will be this from Royal London, which has tweaked its critical illness and children’s critical illness cover options. A new conversion option to its Enhanced Children’s Critical Illness Cover allows the policyholder’s children to take out their own Critical Illness Cover without any medical underwriting, within six months of the children’s cover ending. It has also

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increased the maximum age to which a child is covered to 23 if they are in full-time education (21 otherwise).

This, of course, will be a conversation to have with the children – most young people, thinking themselves invincible, can’t get their heads round the need for most insurances.

In addition the cover offers an advanced surgery benefit has been added to the cover, which allows a pay-out to be made as soon as a customer is on an NHS waiting list for surgery, rather than after it is performed.

This applies to any of the 12 surgeries within the policy’s main definitions. If the need for surgery prohibits the individual from working, this means some welcome income to keep things going.

Method amidst the madness

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ome sanity in the madness of COVID-19: the Financial Conduct Authority has made it clear to mortgage borrowers that they can take a payment holiday for three months if they have difficulties in paying, that they will not be charged a fee, that it shouldn’t impact their credit score, and that there is a measure of protection against repossession. In the words of the FCA: “Repossession should not be commenced or continued with unless the firm can demonstrate

“The least we can do is help in any way we can to allay clients’ concerns and guide them in the right direction” clearly that the customer has agreed it is in their best interest.”

It is to be hoped that clients have a rainy-day fund of three to six months’ income with which they can pay their bills and mortgage. But in reality, how many have that much put aside?

There is little a mortgage broker – or indeed a healthcare intermediary – can realistically do to help the situation clients are in if financial problems do befall them.

While there is little in it for us from fee perspective, the least we can do is help in any way we can to allay clients’ concerns and guide them in the right direction, towards those lenders and product providers that will be able to get them the answers and support they need.

If, in the midst of all these concerning times, we can listen to clients and get them reassurance, in the long run, it will hopefully give them some trust in our markets and in the products and services we provide, and keep them engaged with us for the better times that will return. M I www.mortgageintroducer.com

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GENERAL INSURANCE

Protection during the COVID-19 pandemic Rob Evans CEO, Paymentshield

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very area of the UK economy has been hit by the outbreak of the coronavirus, and the mortgage market is no exception. For advisers, this is going to necessitate a change in normal business operations to ensure that they can bolster any potential loss of income during this period.

SHIFT OF FOCUS

In the short-term, we are undoubtedly going to see a downturn in new business, as the number of people taking out a mortgage for a new property declines. Advisers should instead shift their focus to remortgage and product transfer clients and think about how they can upsell general insurance to help close any temporary income gap. By continuing to sell GI to remortgaging clients in the long-term, this will build up a recurring income stream that can bring stability to the mortgage business.

Even taking this remortgage strategy, however, does not come without its complications. In response to COVID-19, some lenders have stopped accepting desktop valuations (particularly on higher value properties where there’s greater risk) and of course, no physical ones will be conducted whilst the UK is under social distancing rules.

Other lenders, including several Lloyd’s Banking Group intermediary brands, are temporarily withdrawing some mortgage products for both first-time buyers and remortgaging customers. This means that the process of remortgaging might take considerably longer than normal. www.mortgageintroducer.com

Nevertheless, there is still an opportunity for advisers. A good place to start is looking at their back book to identify if anyone is due to remortgage, and proactively contacting them to offer support.

Consumers will undoubtedly be looking to save money, and in the current economic climate, reminding them of the value of professional advice will not go unheeded.

Regardless of whether the remortgage gets put on pause by the lender, advisers should ensure they offer to look into the client’s other financial products, such as GI, and determine whether they offer the best value.

We know from speaking to advisers within Paymentshield’s portolio that time is often a perceived barrier to having a GI conversation, with many advisers believing it takes too long. A pause in the remortgaging process gives advisers an opportunity to take full advantage of this gap and make having a GI conversation easier.

We also know that buyers on their second or subsequent mortgages can often feel more ‘clued up’ on the buying process and are therefore more sceptical of advisers’ recommendations.

Justifying the move to a new home

Diversification will mitigate some of the challenges

insurance policy can be easy, however, provided advisers take the right approach and use the right tools.

Using the Paymentshield Defaqto Compare tool, for example, can make talking about the benefits of a new policy compared to an existing one easy, with clients able to physically see how the two policies stand up against one another. As an independent comparison tool, Defaqto Compare can give additional validity to adviser recommendations, and help clients objectively recognise a quality product.

If the client has been with the same insurer for many years, the chances are they haven’t reviewed their insurance needs for a while and they may be paying over the odds. In these situations, clients may have a policy that doesn’t actually fit their needs and may not be providing value for money.

While ensuring the right cover for their needs is top priority, you may even be able to save them money; these savings can help to pay for any potential cancellation fee costs (for example, if the renewal dates don’t match up), which itself often acts as a deterrent in advisers broaching a GI sale with a remortgage customer.

The outbreak of coronavirus will impact adviser business, but these effects do not need to be felt so harshly, provided advisers look at the opportunities that are available elsewhere.

INCOME SUPPLEMENT

Remortgage customers are one such example, and selling GI to them is a great way to supplement any loss in income – not least because remortgage premiums are almost always higher, meaning increased commission for the adviser. If there is a remortgage pause as a result of temporary actions taken by the lender, this too should be seen as an opportunity, granting advisers time to commit to those GI conversations.

Ultimately, we have entered an era in which customers will want to feel more reassured financially than ever before, and will want to know with absolute certainty that they have products that are going to protect them. Advisers are in the best position to proactively offer this support. M I APRIL 2020 MORTGAGE INTRODUCER

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GENERAL INSURANCE

The UK has had a battering Geoff Hall chairman, Berkeley Alexander

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ast month, two winter storms brought major flooding and the UK insurance industry is set to pay out £363m on claims.

Although the news agenda has shifted to COVID-19, the aftermath of the floods is still very much a reality for those affected.

Whilst we wouldn’t condone any form of ambulance chasing, there will be many property owners out there who now find themselves underinsured or without any cover and in desperate need of professional advice.

Solutions are out there for both homeowners and businesses affected or at risk of flooding. For residential homeowners, the solution might be to use a Flood Re scheme product. Whilst there are some restrictions on who can access this scheme, general insurance providers can help find cover for affected clients.

For businesses the options are more limited, with many commercial insurers being unwilling to take the flood risk themselves. However, it’s possible to arrange cover excluding flood, so they can continue to trade and be insured against the risks.

There is also an innovative solution that offers one option – a parametric flood insurance where in the event of a flood, when water depths exceed a threshold, a pre-agreed settlement figure is paid out.

This works well on properties that are already flood resilient, with hard tiled floors, raised electrics and where it’s possible for some items of stock and equipment to be stored well above the potential flood levels.

It doesn’t give the client access to a claims service that can help manage the reinstatement process on the fabric of the property, but it gives them an agreed payment, enabling them to replace furnishings and stock, and to cover some of the lost profits. It’s a good idea in certain circumstances, especially in conjunction with the right insurance solutions. M I

Business interruption blame game

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he COVID-19 situation changes regularly. At the time of writing, the government has just announced the outcome of urgent talks with the insurance industry on business interruption insurance to secure insurers’ commitment to cover the pandemic.

Chancellor Sunak stated: “Let me confirm that, for those businesses which do have a [business interruption] policy that covers pandemics, the government’s action is sufficient and will allow businesses to make an insurance claim against their policy.”

On the face of it, this will bring welcome relief to businesses around the country with BI cover.

However, the ABI has confirmed that most companies, even those with some form of BI cover, won’t have cover that would enable them to claim against COVID-19.

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This is because most standard BI cover – the type the majority of businesses purchase – does not include forced closure by authorities, as it is intended to cover the loss of profit following physical damage to property affecting their ability to trade.

Some businesses will have an extension for closure due to infectious diseases, but the precise nature of the cover will vary from insurer to insurer, so clients will need to check with their insurer to see if they are covered.

For those businesses with BI cover that has no infectious disease extension, it should be remembered that their cover remains valuable and has a healthy claims ratio for the types of claims that it is intended for.

Standard BI cover is simply not designed to respond in this situation, and there’s little merit in playing the blame game.

Insurers’ actions following COVID-19

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t the time of writing, we have seen insurers agreeing to a number of measures to help customers; including covering homeworkers without the need to contact the insurer, motor insurers agreeing to extend the uses covered under policies, and insurers extending the periods of unoccupancy before restrictions to cover kick in.

At the time of writing, there have been no initiatives announced in connection with extending business interruption support to the businesses around the UK which don’t have the cover against COVID-19.

Whilst it’s great to see insurers widening the cover of many policies, it’s not surprising they aren’t currently taking steps on BI – after all, the claims likely to be paid from insuring homeworkers are likely to be very small, whilst the claims from agreeing to pay out on BI from the lockdown are guaranteed to run into hundreds of millions, if not billions, of pounds.

GOVERNMENT LED

I may be proven wrong by the time you read this, but if there is support for businesses in respect of the loss of income following the lockdown and dip in the economy, it has to be government led and funded.

The government has already taken major steps to help with salaries for businesses and the self-employed, in addition to grants, changes to business rates, delays on VAT payments and the like; but it cannot expect insurers to fund this. M I www.mortgageintroducer.com

REVIEW

TECHNOLOGY

Tech communication during virus crisis EMAILS

Rameez Zafar CEO, eligible.ai

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ost UK businesses have now asked employees to work from home, in quarantine, avoiding human contact to help contain the spread of coronavirus.

So, what do you do when your business is programmed to meet your clients face-to-face, and what does this mean for mortgage brokers?

Borrowers understand the value of face-to-face meetings and real vs robo advice. However, what can mortgage brokers do when coronavirus is disrupting their primary sales channel?

We’ve got 10 ways tech supports brokers to communicate with clients through COVID-19.

54% of consumers choose to contact a business via email, ranking it the top customer service channel.

Email marketing is a great way to keep in touch with clients when you can’t talk over the phone or meet face-to-face. This includes one-to-one check-ins as well as group newsletters.

My tip: include a specific subject line and don’t ever take it for granted, because some clients receive hundreds of emails daily (I know I do!).

AUTOMATIONS AND AUTORESPONDERS

Setting up automation can help keep clients engaged through their journey with you. Once set up, these run in the background so you don’t need to lift a finger. Your clients are automatically nurtured, so they know you’re always thinking about them.

Autoresponders are a good way for you to capture and respond to queries or information when you’re not around.

Tech supports you on autopilot. www.mortgageintroducer.com

WEBINARS

The beauty of content is that it can be repurposed in many ways. Take webinars: you can use any guides or documents you’ve created and break them down in a live webinar to talk through in more detail. They can serve as informative tutorials for groups of prospects or clients. It’s a great way to encourage community engagement.

SOCIAL MEDIA

Tech supports through digital channels.

You can reach out to your clients via social media. Encourage prospects and clients to follow you to get the latest news and information about your company.

Building your connections can help you leverage your network and create advocates of your brand – like your star clients or influencers who can essentially promote your firm for you.

VIDEO

Try using video as part of your engagement strategy. You can record bitesize videos about your offering, frequently asked questions and handy tips. You can store these on your website, share through social media and as part of your email strategy. Don’t forget live video, think Facetime. Try video calling clients to catch up.

LIVE CHAT

It’s reported that more than 41% of consumers expect live chat on your website. It’s a great way to connect to businesses in real-time. Consumers want to know information there and then, which is why chat works well to serve this need. My tip: make sure it’s constantly monitored and set up with autoresponders.

WEBSITE

Your website is an important asset to your business and your brand. You can direct clients to your site as a means to communicate. Other tech support channels in this list can be hosted on your website.

Lost for ways how to drive traffic to your site? Check out our blogs to get some inspiration.

PPC ADS

TEXT

You might have a system already through which you can send auto text messages. Normally these would be set up to send reminders to clients about meetings or key milestones in their mortgage journey.

Texts should be short. They can include a calls to action as well as links to content to push your clients into your website or app.

SCREEN SHARES

If you need to look over a client’s documents but you can’t get a face-toface, try a Webex – an online meeting allowing you to meet with clients virtually. You can screen share and video call to run through any paperbased or electronic documents. If you’re new to this, do a dry run before, so you can test the audio and make sure you’ve got everything set up.

Another digital way tech supports is through paid ads.

With paid ads, you can drive traffic to your site quickly via search engines and your social channels. You’ll need to set aside some budget for this inbound activity.

You can also target lists of clients, for example, if you want to promote an online event or webinar, or a real event after COVID-19 restrictions ease off.

You’ll also be well in tune with using a telephone, which is pretty standard practice for a mortgage broker. So, don’t forget to give your clients quick check-in over the phone.

Technology is a wonderful thing.

It’s what helps us keep connected, especially during times where we have to keep in touch remotely. We’re all in this together, so if you’re looking for advice on working remotely please reach out to me. M I APRIL 2020 MORTGAGE INTRODUCER

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TECHNOLOGY

AML tax should be risk-based John Dobson chief executive, SmartSearch

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ast month’s Budget was delivered in extraordinary circumstances. There’s no way of telling exactly when the coronavirus crisis will pass, or what damage it will have done to people’s health and to the economy in the meantime. Tackling that crisis has to be the first priority at the moment.

At some point, though, normality will return, so it’s important to be aware of what may have slipped under the radar in the voluminous details that accompanied the Budget.

One of these was the proposal for a new Economic Crime Levy, to be imposed on firms that are currently subject to the Money Laundering Regulations – which includes estate agents and conveyancers, for example.

It is not immediately clear what the proposed new levy is going to pay for.

The Budget also talked about beefing up Companies House, which is welcome, but there didn’t seem to be a direct linkage between the two announcements.

are not what is needed as we look to forge a new place for ourselves in the world post-Brexit.

The Treasury has promised a consultation on the proposals ‘later in the spring’ and it will be important that the government uses that opportunity to spell out exactly why it believes the levy is needed and what it is going to pay for.

It should also set out an approach to implementing the levy that rewards firms which have sound processes in place that reduce the risk that they

“The government itself has said it wants to incentivise the adoption of electronic ID verification, and this is an ideal opportunity to do that by using a risk-based approach to the proposed new levy”

will be successfully targeted by money launderers.

The government itself has said it wants to incentivise the adoption of electronic ID verification; this is an ideal opportunity to do that by using a risk-based approach to the proposed new levy.

Firms that are continuing to rely on manual checks do not benefit from the additional features a modern AML solution can provide, including not just full screening against Sanctions and Politically Exposed Persons lists, but also ongoing monitoring, alerting them to any changes in status.

This leaves them much more exposed to potential money-laundering activity, and they therefore present a greater risk.

It is only right that firms that have put in place a robust, modern approach to AML should not have to pay for those that are trying to get by with outdated processes.

The structure of any new levy needs to reflect this. M I

BURDEN OF COMPLIANCE

It is undoubtedly the case that many firms already bearing the burden of compliance with the MLRs will resent the imposition of a new levy specifically on them.

There is a case that the fight against money laundering – and financial crime in general – should be funded through general taxation, as with ‘regular’ crime.

Nonetheless, the government is to be applauded for its desire to step up antimoney-laundering efforts as it is vital that the UK preserves its reputation as a safe place to invest and do business.

Recent reports citing London – and the property market especially – as the ‘money laundering capital of the world’

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There is a case that the fight against money laundering should be funded out of general taxation

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TECHNOLOGY

Don’t forget the important stuff Steve Goodall CEO, ULS Technology

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s I write this column, the UK is sliding into the grip of coronavirus-related lockdown. Things change hourly, so trying to predict anything accurately or provide sensible analysis of what the economy is going to look like this afternoon, let alone in three months’ time, is challenging.

While there is no doubt that much of our behaviour over the next nine to 12 months will be dominated by our responses to COVID-19, and that its impact on our economy will be significant, there is a real danger that we will focus on the urgent and put the important to one side.

BIG TRENDS

While the urgency of looking after people’s health is not in question, I am nevertheless concerned that we will lose sight of the need to plan for important changes that are likely to affect our economy and society significantly over the coming years.

I say this, as there are several big trends that will influence the future of the British housing market, with or without coronavirus spreading – devastating though that could be.

Alongside climate change, net zero, an ageing population and long-term low interest rates, sits the thorny issue of the law that underlies the property transaction in the UK. The conveyance of property from one party to another has been virtually unchanged in terms of the legal process for 200 years. While conveyancing bucket shops have sprung up, and Tesco law now means non-lawyers can run conveyancing businesses, this has changed how conveyancing is processed, rather than the actual law.

As technology shifts the house purchase process, and as consumers

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drive all parties involved to provide quicker, slicker service, there is an increasing need for the law to be reviewed – is it fit for purpose in today’s society? And what about society in 30, or even 50 years?

This government has shown it is prepared to address some of the issues in the legal world – the most wellknown being leasehold reform.

After multiple scandals emerged over the past five or so years, revealing escalating ground rents and freeholds being sold on to unscrupulous investors, the government finally commissioned a review into how leaseholds were being managed.

In January this year, the Law Commission set out a range of proposals which it claims will make buying the freehold and extending leases cheaper for the UK’s four million leaseholders.

The government is now in the process of reviewing these proposals and should, coronavirus notwithstanding, set out its final rules later this year.

“I am concerned that we will lose sight of the need to plan for important changes that are likely to affect our economy and society” Government has already acted on leasehold, reducing ground rents to a peppercorn level and limiting new leasehold to flats, save in the most exceptional circumstances. The Competition and Markets Authority is also examining the alleged mis-selling of leasehold properties.

These sorts of reforms are welcome, yet any broker with more than a month’s experience will tell you that delays in the conveyancing process continue to be the biggest procedural drag on transactions.

We have invested heavily in producing technology and systems that allow us to provide smoother, more secure communications

between solicitors, buyers and sellers, lenders, brokers and estate agents.

Platforms such as DigitalMove already address much of the stickiness in the customer journey by centralising all communication digitally, wiping weeks off the trickiest of transactions.

We’ve just done 10,000 cases through this platform, proving its efficacy. In the future, it’s entirely plausible that consumers will access home and contents insurance, energy provisions, broadband and other basic services through similar platforms.

LAW REFORM

Innovating in this way is crucial, yet reform of the underlying law could have a much more fundamental impact on the housing market – where properties are old, thatched, listed, at risk of subsidence or flooding, the conveyancing element of the transaction is crucial.

It highlights risk for both the lender and the buyer. It provides clarity on where the responsibilities lie should there be any financial implications attached to the property – rights of access that don’t exist, for example, and need to be negotiated.

The leasehold scandal proves that even where properties are brand new, the conveyancing risk remains key for buyers and lenders. Nevertheless, there is a strong argument for reviewing the consumer protections in place within property law.

The Consumer Credit Act protects consumers who purchase within its purview – buy a faulty washing machine on your credit card and you’re effectively insured. But buy a faulty home and your only recourse is to sue the developer.

This is why conveyancing is so important – and lengthy.

Were there to be stronger consumer protections in place, putting more financial onus on sellers to provide homes of the quality they claim to offer, it would have a knock-on effect on the level of due diligence needed and the time conveyancing takes. M I www.mortgageintroducer.com

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EQUITY RELEASE

The changing face of retirement Alice Watson head of marketing and communications, Canada Life

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etirement is evolving; not only are people living longer than they may have expected, but they may well be working up to, and beyond, their anticipated retirement date too. With this stage of life now potentially lasting several decades, the reality is that most of us will have to pay for later life care at some stage – whether that be for ourselves or our loved ones.

With recent figures from the Equity Release Council showing that falling ill and having to pay for care is the top priority for those aged 55 and over, we need to help today’s retirees meet these challenges, so they can enjoy the retirement they’ve worked long and hard for.

While the state pension provides support of £168.60 per week, this alone is not enough. Age UK estimates that the cost of care is between £600-800 per week – meaning many of today’s retirees are likely to face a significant shortfall.

With nursing home costs expected to increase almost 18% over the next 10 years, this represents a significant challenge for the ageing population.

However, the good news is that the later life lending sector has evolved and is innovating to meet these new social and economic realities.

With over £4trn in net UK property wealth, equity release is allowing over 55s to unlock the wealth stored in their homes to supplement the cost of care in the form of a lump sum.

In fact, our own research found that nearly a quarter (24%) of people who have not yet retired, plan to use equity release to fund their future care needs.

www.mortgageintroducer.com

By tapping into their property wealth, people can age in their homes, while accessing cash to fund residential care solutions for themselves or their loved ones.

Similarly, taking out a lifetime mortgage could fund any home improvements or adaptations needed to suit retirees’ evolving needs, such as installing a wet room or a downstairs bathroom, which could be the difference between being able to stay in their own home or move into care.

Alternatively, for those who do need to move into a care home, using a later life buy-to-let mortgage could be an

option that would help cover the cost of care fees.

This operates very much like equity release in that the balance doesn’t need to be repaid until a person’s death and there are no affordability checks.

However, unlike a traditional lifetime mortgage, the move into care would not trigger repayment.

Ultimately, engagement is key; it’s about getting people to think about their wants and needs in the different stages of retirement.

As an industry, it’s important we make clear that equity release could be a way for people to stay in their homes and boost their retirement income.

There are a growing number of flexible solutions available to help customers who are looking to release equity from their properties, and advisers are well placed to help them find the product best suited to their specific circumstances. M I

Getting people to think about their wants and needs in the different stages of retirement is essential

APRIL 2020

MORTGAGE INTRODUCER

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REVIEW

EQUITY RELEASE

Take advantage of the support on offer Stuart Wilson CEO, Air Group

I

t has, without doubt, been an extraordinary time recently. I’m conscious that I’m writing this article a couple of weeks prior to you reading it, which means that while a lot has already changed; we could be in a very different space by then.

Things have moved quickly and will continue to do so, and therefore I think it’s important that I deal in generalities rather than specifics because, quite frankly, they may be irrelevant by the time you hear this.

For context, at the time of writing, it would appear that most businesses within financial services have introduced their contingency plans, with the vast majority of staff working from home.

As has been mentioned many times before, in a sense the advisory profession is fortunate because we have the capability and the access to tech to do this. Others, in many other sectors, are not so fortunate.

However, this is of course a worrying time for many people, not least our own profession, as we get to grips with what these work practice changes mean, how they will impact on our ability to continue to provide advice to clients, and how we work with our partners to complete business.

Every single mortgage or later life lending stakeholder is facing the same challenges; when many borrowers are worried about how they will pay their mortgages going forward, we should all be willing to cut those organisations some slack in terms of response times and how we work together.

That said, we still need to concentrate on the needs of our www.mortgageintroducer.com

clients and how we support them.

In the later life market, we talk a lot about the potential for customer vulnerability and the specific ways we, as advice professionals, identify that vulnerability, the soft skills required to deal with it, and what that means in terms of the service we provide.

Over the coming weeks, there is a very strong case to suggest that the methods that we use when it comes to dealing with potentially vulnerable clients should be extended to all individuals. In ordinary circumstances this would not be the case, but we are living in far from ordinary circumstances.

Advisers will really show their worth in these times

Even those who might feel they are at the very furthest reaches of risk when it comes to their financial situation, may still be feeling vulnerable and worried.

Anyone could catch the virus and, even if you do not, there is clearly still an impact to every single person in the country; we’re already seeing that with businesses having to close and employees wondering if they might even open again.

Clearly, there is government support, but I believe there is an overwhelming need for a ‘kid glove’ approach to all clients, simply because of the degree of uncertainty that is currently out there in the market.

This is where advisers are really going to prove their worth and provide

help, support and (hopefully) put in place the necessary requirements to allow people a degree of leeway with their mortgage payments, set them in a firmer financial position for the short-term, or indeed give them the protection they need in order to feel safe and secure in their own homes.

There’s no doubting that a threemonth mortgage holiday is going to be required by large numbers of mortgage borrowers, and advisers clearly have a role to play here in terms of looking at the arrangement offered and determining whether it is the right option for that individual.

Other options could be better – moving to an interest-only option, for example, or simply cutting the payment for a short period.

The same really applies in the later life space, or those approaching later life. How many individuals, close to retirement, will have seen the value of their pension drop dramatically in the past week or so, and be worried about what this means for retirement living standards? How many might now feel that their house should be utilised as an asset in order to support their needs going forward?

Is there a possibility to review the finances of those about to reach later life in order to put them in a better position after this uncertain economic period has ended?

While there will clearly be worried individuals out there, advisers have the opportunity to alleviate some of the financial worries that will be prevalent.

The government and the Bank of England have provided plenty of advice touchstones – from mortgage holidays to the historic cuts to the Bank Base Rate – for advisers to communicate with their existing clients.

Let’s ensure they are aware of the potential options and solutions available, and that you are the very best person to support them. And make sure you take advantage of the raft of support that Air Group continues to offer its members – we have a dedicated team working for you and available to help. No-one needs to work through this on their own, so please use us as you see fit – we will get through this together. M I APRIL 2020 MORTGAGE INTRODUCER

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REVIEW

EQUITY RELEASE

Ensuring best practice Claire Barker managing director, Equilaw

F

igures published by the Equity Release Council have revealed that £3.92bn worth of housing equity was released by property owners in 2019, with almost 45,000 customers drawing lump sum averages of £97,300 or £64,000 on drawdown mortgages.

These returns mark a small decrease on figures for the previous year (when 46,297 customers unlocked £3.94bn worth of property wealth) but more than hold their own when compared to the number of conventional mortgage approvals recorded during 2019 (with figures reaching a seven-month low in October following three consecutive months of decline) and taking into account the inevitable impact of Brexit on consumer confidence.

Yet, while some financial commentators have chosen to view the figures as evidence of stagnation, or even saturation, within the ER market, others (such as Mark Gregory, chief executive of Equity Release Supermarket and David Burrowes, chairman of the ERC) have described them as indicative of a period of consolidation across the sector and as a gateway to a new decade of growth.

Indeed, the last three months of 2019 proved to be the busiest period of the year for the industry, with over £1bn worth of equity being unlocked by consumers in the lead up to Christmas and overall transactions demonstrating a 6% increase on the previous quarter; all of which was achieved despite the Westminster political soap opera reaching its peak at this time.

Moreover, with both house prices and residential transactions experiencing a demonstrable upturn in the wake of the general election and the much vaunted Boris Bounce continuing to stoke levels of consumer confidence

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MORTGAGE INTRODUCER APRIL 2020

and demand to pre-Brexit heights, there is every indication that the later life lending sector could be on the verge of a new era of boom.

For example, recent research by Canada Life has found that over 40% of homeowners believe they are likely to utilise the wealth tied up in their property to fund future retirements, with 15 million saying that they intend to retain their current home rather than downsize. In addition, with average increases in house prices adding over £1bn worth of equity to UK homeowners aged 55 or over during 2019, the research has also established that growing numbers of advisors now believe that revenues within the ER market could grow to £5bn or more in 2020 – a potentially record breaking performance. So, the holding pattern of 2019 looks likely to serve as a springboard for future gains.

PRODUCT RANGE

The industry has also consolidated its position amongst customer bases by strengthening the breadth and range of its product choices, with the number of options growing by 128% between August 2018 and August 2019.

Furthermore, the introduction of innovative new product features has offered a more flexible approach to lending, with interest or value repayment options and mortgages which protect intended inheritance amounts proving particularly popular.

And, of course, interest rates continue to sit at their lowest level for many years, with intensifying competition amongst lenders pushing averages to a record 4.19% (as of last September). Yet, perhaps the most important (and gratifying) development of recent times has been the dramatic upsurge in ERC membership, with the number of firms applying to join the trade body effectively doubling over the past two years (up from 219 in 2017 to 431) and the number of registrations amongst adviser firms, solicitor practices and individual members growing by 35%, 46% and

77% (respectively) in 2019.

This upswing is significant for the future growth and reputation of the equity release sector, as it brings all members under the ERC’s best practice standards and thereby ensures that principles of service, security and protection are maintained and applied across the industry.

In November of last year, for example, the ERC launched an update of its existing standards following a consultation of members (including providers, advisers, solicitors and surveyors) as well as the Financial Conduct Authority, the Treasury and the Mortgage and Pensions Service.

These rules are designed to build on existing regulatory requirements by offering three distinct levels of protection to clients; namely, fully regulated financial advice, clear product safeguards and independent face-to-face legal advice.

They are also intended to ensure that clients who exhibit mental, physical or financial vulnerability are offered support and guidance at every stage of an application and to safeguard customers from being coerced into taking contracts that may be detrimental to their circumstances.

In short, they provide a model (or infrastructure) that is in line with current regulatory thinking and which allows for future developments within the later life lending sector.

This means that, as we approach the new financial year, our industry is in a unique position to capitalise on revitalising levels of demand and confidence amongst financial consumers, boasting a wide choice of products, a diversifying range of inbuilt features that can cater to the shifting needs or circumstances of clients, increasingly attractive rates and a comprehensive set of guidelines and principles with which to underpin the entire sector.

Nothing future-proofs a financial enterprise better than a period of consolidation at all levels. Let it be our MI foundation for the future. www.mortgageintroducer.com

REVIEW

CONVEYANCING

Navigating difficult times Mark Snape managing director, Broker Conveyancing

T

he nature of writing for this magazine is that, at times, what you write today might not necessarily be the case when it is published.

Given the situation at present regarding the coronavirus, that seems doubly pertinent, because the situation is changing so quickly that the ‘status quo’ – if you can truly describe it as that – doesn’t really exist.

Measures are announced daily – not just those that impact on the way we are living our lives but those that fundamentally impact on our work.

With that being the case, it might be necessary to leave speculation to one side. However, I think it’s also fair to make some assumptions, namely that by the time you read this we are not going to be anywhere near back to a ‘normal situation’.

Vast swathes of the financial services sector will be working remotely and, while hopefully the government measures have given employers a degree of leeway and confidence, we could still have a big degree of fluidity around the overall situation.

And yet, where possible, there is a great necessity for all of us who work in this sector to carry on working.

There are large numbers of selfemployed advisers, as well as those who run companies where they are the only employee; there are many firms where advisers’ incomes are tied up with the level of business they transact, and therefore, simply isolating at home and using the time to watch endless boxsets is just not an option.

Therefore, keeping working and being able to advise clients through this situation is not just desirable, it’s an absolute necessity.

In a way, the advisory profession is fortunate that the systems and www.mortgageintroducer.com

processes it uses, and the technology, allow it to do just that.

And yet there is, of course, still a reliance on what the market is doing, what other professionals within the chain are able to cope with, what other organisations have in place to continue dealing with business, and ultimately what conveyancers can do in order to get transactions through to their natural exchange or completion endpoint.

We are all inter-connected in that sense, and therefore all parties are going to need to be able to function effectively in order for us to make our livings. I think it’s important not to forget that should cases appear a little trickier to close than normal, we are all in the same boat. We all want to maintain market functionality and there is no-one among us who is delaying business on purpose.

CONTACTING CLIENTS

For advisers, the focus has to be on maintaining business as usual but also ensuring that every single client gets everything they need. Whether that is help on their mortgage situation – and the government-introduced three-month payment holiday clearly provides the catalyst to contact all current clients – advice regarding their existing protection cover, or if they are working through a product transfer or remortgage, it’s providing conveyancing advice in order to get the case completed as quickly as possible.

The market has spent an inordinate amount of time talking about the need for diversification and urging advisers to make the most of the opportunity they have, not just with the mortgage advice but all the other ancillary services. I can think of no better time to be doing this, because let’s be frank, we may well see a significant drop-off in purchase activity simply because of the change to property viewing logistics.

That being the case, your existing client base becomes more important than ever. It’s been positive to see organisations like the Mortgage Market Alliance preaching the benefits of

Customers need reassurance and advice at this time

advice, especially when many existing clients or borrowers will be very worried about how they maintain their mortgage payment and what options are available to them.

I’ve also recently read of potential problems for clients who will have the opportunity to product transfer or remortgage in the next three to six months, but also want a mortgage holiday in the short-term.

Again, the advice has been to take lender options back to their adviser, who may well need to process a product transfer, for example, before requesting a mortgage holiday.

Otherwise, some lenders are not allowing PTs and clients could end up on far more expensive standard variable rates.

It’s the nuanced nature of such situations that require, more than ever, an adviser’s influence, and clearly while you have the time and attention of those clients it makes absolute sense to ensure that all other parts of their financial make-up are applied correctly.

At such times, advisers prove their overwhelming worth and the future of their businesses can be assured.

We should be in no doubt that consumers are worried, and want reassurance and advice – not just on their mortgage situation but across all other needs.

It could be a difficult few months to navigate, so let’s ensure no product stone is left unturned, and clients get MI quality advice across all areas.

APRIL 2020 MORTGAGE INTRODUCER

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REVIEW

EDUCATION

Sheltering from the storm of uncertainty Michael Nicholls relationship manager, LIBF

I

f we think back to just a few months ago, things were looking up. The ‘will we, won’t we’ uncertainty around Brexit was finally over.

The housing market was starting to move, with more houses going on the market and the banks approving more mortgages than they had in years.

Annual house price growth was stronger than it had been for 18 months and the media was reporting on green shoots in the economy.

So much has changed so quickly – and all because of a pathogen mutating on the other side of the world.

None of us know how this is going to play out. We’re all worried about our families, our friends, our work and what the economic fallout may be.

“We have to be prepared for a financial downturn which could lead to unemployment and people struggling to pay mortgages” Understandably, people are waiting to see what happens before making major changes in their lives, such as moving house. As the Halifax announced, the UK price recovery is “at the mercy of coronavirus.”

Let’s hope that – as the prime minister has suggested – coronavirus will mean putting our lives on hold for a few months and then things will go back to normal. But even if that is the case, there are still likely to be farreaching consequences.

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MORTGAGE INTRODUCER APRIL 2020

For example, there are likely to be far fewer international students coming to UK universities this autumn.

That means fewer students renting student accommodation, which is a blow to buy-to-let landlords who bought property in student areas.

The high street is already struggling, and is likely to be hit once again in university towns where students would usually be out shopping, eating, drinking and socialising.

In short, we have to be prepared for a financial downturn, even if relatively short-lived, which could lead to unemployment, unpaid rent and people struggling to pay existing mortgages or take on new debt.

So, what should mortgage brokers and the industry be doing?

LEARN FROM THE PAST

It’s difficult for brokers, because what we do depends a lot on what happens in the lending sector.

In terms of thinking about how to protect your business in a downturn, a good starting point is to ask how firms and individual brokers survived previous crises – not least the banking crisis of 2008.

One option was to sell more protection products to keep cashflow coming in. But if people are being squeezed financially, are they going to be able to buy new insurance policies?

Look back at how firms survived the last crisis, and you’ll see that highquality, professional mortgage brokers made it through simply by being very good at what they did and having enough resources to cushion the fall.

If you’re a small business, it’s worth thinking about teaming up with other brokers and – as I proposed in this column in October 2019 – with financial advice companies, which are facing their own set of challenges such as a shortage of both specialist advisers and paraplanners.

When clients are looking to rejig their finances in an era of unpredictable markets, mortgage brokers can contribute a great deal with their knowledge of the housing markets, specialist lending and equity release.

BUILDING YOUR SKILLS COULD HELP YOU STAND OUT FROM THE CROWD

Specialist knowledge can also prove invaluable in attracting and keeping clients.

You might want to consider building your skills with more advanced and specialist qualifications.

The LIBF CeMAP Diploma is the next step for mortgage advisers looking to expand their understanding of financial services and the residential lending sector.

This will give you the edge when it comes to advising on more specialist mortgage products like new build and high net worth, as well as protection products.

When you’ve qualified you can use the CeMAP Diploma designation after your name, giving confidence to your clients and your colleagues that you have the skills and specialist knowledge they need.

Or you might find the time to study for that qualification in regulated equity release that you’ve been meaning to do for so long.

It takes an average of six months to complete part-time, so you’ll be ready for when the economy hopefully bounces back.

One thing you should always be doing is keeping on top of your continued professional development.

If you’ve done 15 hours of CPD within the past year and made a commitment to do at least 15 hours this year, you could well be on the way to achieving CeMAP Professional status.

It’s easy, too. You can source your own CPD or, with LIBF, get access to our course website, where you’ll find plenty of resources.

The best thing is that there’s nothing to stop you topping up your CPD or taking another professional qualification, because all the learning is online, and it will stand you in good stead for whatever the future holds. M I www.mortgageintroducer.com

REVIEW

COMPLEX

How to service complex income Craig Middleton, mortgage sales and distribution manager, Harpenden Building Society

I

n February, the Office for National Statistics reported that the overall employment rate had increased by 0.6% year on year (Dec 2018 vs Dec 2019) to a record high of 76.5% (since ONS figures began in January to March 1971).

Employment is defined by the number of people aged 16 and over in paid work, and the employment rate is the proportion of people in paid work between 16 and 64.

At face value, this looks like a very encouraging sign for the housing market, but further investigation reveals that income characteristics have changed significantly.

At Harpenden Building Society, we’ve been specialising in complex income for many years and have seen a distinct increase in the number of brokers looking for support. While complex income used to be nonstandard, the frequency of mortgage

applications classified as complex is increasing. There are several drivers of this trend.

CHANGING EMPLOYMENT PATTERNS

Last year, analysts at UK Finance explained that borrower incomes had become more complicated as more people went into self-employment or contractor roles.

The ageing population, and more people working longer, have also played a role. More and more people under 30 are doing more than one job to support their lifestyles.

This could be a lifestyle choice, with a desire to work outside the ‘day job’ for experience or greater satisfaction, or it could be that financial pressures make having more than one job the only way to make ends meet.

GROWTH IN NON-STANDARD EMPLOYMENT

The analysis from the ONS and UK Finance clearly illustrates the trends:  In January, the ONS reported that there was a record five million selfemployed people, accounting for just over 15% of everyone in employment.

This is 145,000 more than a year earlier.  The ONS also reported that workers aged 65 and older are forecast to be responsible for more than half of all UK employment growth over the next 10 years. Analysis last year from the Labour Force Survey suggested that by 2030 the over-65s will account for 282,000 new UK employees out of a total 546,000.  UK Finance stated that since 2017, the later life sector has grown by more than 25%. The number of new loans to borrowers aged 55 and over went up by 42,866 in the equity release sector and 78,514 in the residential lending sector.

IMPLICATIONS FOR THE INDUSTRY

A proportionate common-sense view can yield results

www.mortgageintroducer.com

These trends have obviously driven product innovation as lenders try to devise solutions for different customer

segments. However, is the development of defined products for specific needs the best way to adapt?

Last year, we had an application from a performance psychologist who specialises in developing high performance in business and professional sports.

Early in 2019, he began the process of buying a new home but encountered major problems because his income comes through public speaking. His income is never totally guaranteed as there are no long-term contracts.

He was looking to re-mortgage a house so that he could buy another property. For 12 years, he’d never missed a mortgage payment, and his new loan repayments would have been the same as he was already paying.

He had consistently earned a healthy income and had never been out of work, yet he couldn’t find anyone to lend to him. We understood his needs, offered flexibility and analysis and provided the customer with a satisfactory solution to his needs.

THE RISE OF MANUAL UNDERWRITING

At Harpenden, we believe that relying for guidance on PAYE income and expenditure will never give the true picture of the risk. This data alone is simply not enough. The world of employment is changing, and we believe that more lenders will need to build underwriting teams able to look at the full financial position and speak with customers to understand their plans, asset portfolios and employment circumstances.

Obviously, the largest lenders don’t have the appetite for this kind of detailed analysis. But lenders with the infrastructure and the experience to take a proportionate common-sense view, when they have gathered the necessary information, will be able to lend to these complex cases. This means that brokers will be able to look at applications in full confidence that options are available to ensure they can take care of their clients. M I APRIL 2020 MORTGAGE INTRODUCER

39

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

Miguel Sard: Adios

MORTGAGE INTRODUCER

“N

ever waste a good crisis...”

These were the immortal words of Winston Chruchill.

And by God, we need Churchill here now don’t we? (Ironically so, given that we are a month away from the 75th anniversary of VE Day).

These past weeks I’ve heard folk talk about the lockdown of the UK (and with it our homebuying sector) via so many different allegories and metaphors. For me, it’s been a bit like a surreal and eerie sequel of The Truman Show, hasn’t it?

My own take on things is that Churchill’s advice is clearly being conveniently adopted by some businesses (Flybe, Carluccios and others with ‘pre-existing afflictions’) but frustratingly, certain mortgage lenders also.

Let’s be frank, some have understandably run for the hills to preserve their funding lines, furloughing all their staff in the process and halting their lending completely so as to take a time-out to re-evaluate a business model which was faltering before the crisis anyway.

Others have just taken respite. Halifax putting in a loan-to-value (LTV) limitation above 60% was surely too harsh (are the underwriting, processing, and valuation requirements actually so much more challenging at say 75% LTV in these times?).

Perhaps as the country’s foremost residential lender, the volume of calls received for mortgage holiday requests was indeed a pandemic in itself. If so, fair enough. Though it was interesting to read that the head of one City brokerage lambasted some of these callers for time wasting. Quite how he knew this is beyond me, and it just goes to show that in troubled times we all get to see what each other’s true DNA looks like don’t we!

Whilst Barclays has also paid a reputational price for the economic gains of having established contact centres overseas, at least two of the totemic Big Six scored Winston Churchill: Immortal words

gains. NatWest may have imposed a haircut on its higher LTV bands, but its service has remained award winning (see next month’s edition and the Mortgageforce Awards coverage).

Amongst other lenders, Accord and Coventry have both proven that even in a disturbed market there are resourceful ways around staffing and surveyingrelated challenges.

But top billing must go to HSBC, which has actually fronted up the most of any lender in this crisis. So Well done (and thanks!) to Chris Pearson and his team.

Elsewhere, it’s been either a good time to bury bad news, or a bad time to celebrate good news, if you get what I mean.

Take Scotland’s ex-First Minister, Alex Salmond and his own good news. Acquitted of sex crimes, his slimey grin whilst stood outside the courthouse barely got more than a flicker of news time.

It’s insightful that since then a whole host of connected parties have continued to refer to him as a ‘sex pest’ and a man with lamentable morality... who you may recall once lectured us on the benefits of a North Atlantic economic alliance with those bastions of financial independence... Ireland and Iceland. I’m not sure it’s over yet for Salmond.

You know, when you look at all these cases (Dave Lee Travis, Rolf Harris, Max Clifford, Harvey Weinstein) their narratives are all obviously linked by a deviant thirst for control and submission in others.

Yet it struck me also that most of them are indeed... waistline-challenged b*stards? Clearly their greed and sloth around sustenance also reads across to a craving to dominate women. Memo to my daughter: “no problem marrying a minger, darling.

But avoid a muncher.”

Other identified morons found in the bagging area

Madonna: Lip sync

FCA: Biggest cretin

this month included the footballer Jack Grealish (and after I extolled his footie qualities last month!), both Jeremy Hunt and Rory Stewart (for childishly trying to undermine Bojo who of course effortlessly vanquished them with ease in the Tory selection process not long ago), and Madonna.

The world’s greatest lip-syncer seemed to suggest that coronavirus was nature’s great way of levelling up humanity. What a daft cow, and not a patch on a true musical talent such as Lady Gaga who has undoubtedly usurped her crown.

But the bagging area’s biggest cretin this month of course is our good old Financial Conduct Authority (FCA). Whilst most other large corporations and public bodies are extending grace and favour to those that need it, our heroic regulators are all sat at home and busy with priorities such as issuing illtimed releases about their apprenticeship numbers and graduate intake targets for 2020/21. All on the back of our £650m worth of annual fees (on which they remain shamefully mute!).

Back to the lenders, or more pertinently the valuers and their automated valuation procedures and thresholds. Ok... some respect is due here. Not carrying out house visits is fine. No probs there.

But can anyone explain why with some lenders a desktop or automated valuation model (AVM) can’t be used for cases where the LTV is, say, sub-70%?

Some lenders also have thresholds which kick in at above say £1m. But why can’t these be overridden when, for example, the loan is 60% or less?

On TV we’ve been hunkering down, and Netflix sure takes all the beating. If you haven’t tried them already, then The Stranger, Fargo, and Ozark are all → APRIL 2020

MORTGAGE INTRODUCER

41

THE OUTLAW

THE MONTH THAT WAS

worth a 10-episode junkie viewing across breakfast, lunch and dinner all in one day.

Sticking with TV, I was delighted to see Lawrence Fox receive a long-overdue apology from the Guardian-reading snowflakes at the actors’ union, Equity. This stemmed from his appalling treatment after he stood up against all things woke-ist on a BBC-biased Question Time recently.

Less enjoyable on the gogglebox has been the inane and sensationalist ramblings of ITV’s Robert I’m-a-f*cking-Peston. Bloody self-important twerp.

Over on BBC and SKY, we also have those two self-righteous traffic wardens, Laura Kuensberg and Beth Rigby. They put me in mind morose of my humorless biology and R.E. teachers at school, and are perhaps best described in the fashion that Japp Stam once described the Neville brothers... a pair of busy ****s .

Having to keep calm in the face their accusational ‘we told you so’ barbs every evening at Downing Street, I think that Boris and his team have done ok, especially Sir Pat Vallance, CMO Chris Whitty, and his evercomposed deputy Jenny. (In one of my Leonard Rossiter styled day-dream moments I do actually imagine myself in Boris’ position, saying: “Thank you, Laura... and thank you Beth too, for your very insightful question; Now can you both just go and f***ing do one. Just report the news... stop trying to BE the news!!!!).

So. Where to finish? There’s only one place really.... when the lockdown might finally be eased. This is when all the stir-crazied householders can put their property on the market, having re a l i s e d t h at their partners aren’t who they thought they

42

Jack Grealish: Absolute moron

were (divorce lawyers will be winning yet again, come summer!).

As William Goldman once said: “Nobody knows anything.” But I am at least allowed to look bloody foolish in a month’s time by predicting the following: 1. We will have to isolate for a further 1-2 weeks after Easter but after that a round of golf and other such lowly-populated pursuits might be acceptable.

2. Lenders and their valuation instrumentation might become more constructive once the peak has passed. Why can’t houses just be disinfected and vacated before they arrive and survey?

3. There will be isolated outbreaks of civil unrest as some folk decide after Easter that Livelihoods are now more important than Lives (a reckoning which I sense Dominic Cummings and the COBRA cabal are now discreetly beginning to arrive at themselves?) .

4. Jack Grealish will emerge from a 4am party pissed. Possibly in the company of fellow wasters Jesse Lingard, Deli Ali, Richard Keogh and a few Derby County FC apprentices.

5. Beyond April, there will be a healthy stock of new properties coming to the market. Prices might indeed drop 10% by Christmas, but that isn’t seismic and let’s face it , transactions are what we now need . It will be a boon for first-time buyers.

6. Liverpool’s unbearables will be awarded the league title — their first in 30 years, let’s not forget, but thoroughly deserved. Guardiola has been caught with his expensive pants embarrassingly lowered.

And at some point in June, the country is going to go on the biggest friggin bender in the UK’s illustrious history.

Hospital A&E departments will be full of drunks, massage parlours will have queues stretching round the corner, divorce lawyers will not be accepting work from anyone with a property under £1m in value, and lenders will be issuing on-the-spot fines for any brokers asking asking if their contact centres are based in Bangalore or Chennai. And I might be back on the 7.23am from Surbiton with Reggie Perrin... wondering WTF that was all that about... and whether the Chinese aristocracy in Wuhan were now having their own, civet, bat, turtle, and pangolin barbecue party?

We’re back to Churchill aren’t we? Never has no much been owed to so many by so bloody few! You just couldn’t make it up, could you?

I’ll be seeing you. Stay safe. M I

Alex Salmond: More to come?

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FEATURE

COVER

Eye of the

storm U

pon the arrival of 2020, many looked ahead with renewed optimism. Following a year of uncertainty in 2019 thanks to Brexit and the General Election, the mortgage market – and wider financial sector – breathed a sigh of relief as a more stable future looked possible. The market had weathered a storm, but following the election result, it saw an influx of cases, higher lending figures and encouraging year-on-year growth.

At the beginning of the year, rumours began to circulate that a virus was spreading in Wuhan, China which originated in a ‘wet market’ in the city which sold both dead and live animals. The virus spread fast and was worryingly taking people’s lives. Then came news of the Diamond Princess cruise ship, which was stuck in the docks of Yokohama in Japan and quickly saw the highest number of cases outside of Wuhan.

Still it appeared far from the UK, and many hoped it would pass. But unfortunately nobody could have predicted what has happened throughout February and March as the virus made its way through Europe and eventually hit UK shores.

At the time of this article going to press, Prime Minister Boris Johnson has been forced to impose strict restrictions on daily life in the UK, warning people to stay in their homes to stop the spread of what is now commonly known as COVID-19. As the market has survived previous uncertainty, it is said that this period could be the worst faced since the 2008 financial crisis.

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Mortgage Introducer has been investigating whether the damage that has already been seen in other parts of the economy will seep into the housing market, how businesses are planning on mitigating the potential impact and what the future may hold as a new crisis grips Britain.

THE ECONOMY AND COVID-19 Despite the fact that the COVID-19 outbreak began in December 2019, the financial markets began reacting to the crisis on the last day of February. The effect was unprecedented, with worldwide leading stock markets facing their worst week since the 2008 financial crisis in the week ending 28 February. In commentary by research consultant Ahmad Ismail for The Conversation, he cites that European shares ended that week down around $1.5tn, with both US and Asian stocks experiencing a similar demise.

The ‘Historic Market Falls Graph’ created by the Financial Times, shows that the coronavirus outbreak ranks fifth in the history of crashes seen since 1929’s Great Depression, with Hitler’s invasion of France, the 2008 financial crisis and Black Monday all proving to be a greater toll on the world economies. Despite this, coronavirus’ impact is dramatic, and at the time of writing the FTSE 100 had dropped by 3.8%.

This is an ongoing outbreak, meaning its future impact is hard to predict, but the world economy is well versed in recovering from a crisis, so many economists →

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INTERVIEW

COVER

Mortgage Introducer looks at the impact of the coronavirus outbreak on the mortgage market and how it may change the future as much as it has the present

www.mortgageintroducer.com

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An economists’ view Martin Beck lead UK economist, Oxford Economics

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he spread of coronavirus and the public health response has upended economists’ previous view of where the UK economy was heading.

Social distancing measures will cause significant disruption to activity in the short-term, particularly for businesses like restaurants and bars where consumption usually takes place in crowded areas (around 40% of the total).

So consumer spending, the most important part of the economy, is set to drop drastically over the coming months.

Meanwhile, the closure of schools for most children will prevent many parents from working, and with some individuals ‘self-isolating’ but unable to work from home, plus a higher incidence of sickness, the supply capacity of the economy will be hit.

The decline in activity in Q2 2020 is likely to exceed the quarterly contractions in the economy seen in the global financial crisis of 2008-2009.

However, we expect the economy to rebound strongly towards the end of 2020.

The consequences of previous pandemics suggest that most activity tends to be delayed rather than destroyed, while the boost from the plunge in oil prices over recent weeks, in addition to policy support from the government and Bank of England, will help activity to return to normal.

The bank’s Monetar y Policy Committee has cut the official interest rate to a record low of 0.1% and has restarted quantitative easing with £200bn of asset purchases, consisting of gilts and private sector securities.

It has also introduced a new Term Funding Scheme with additional incentives for small businesses, which aims to ensure a full passthrough of the rate cuts.

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Policymakers have implemented a number of measures aimed at sustaining the supply of credit, while commercial lenders have announced a three-month mortgage holiday for people affected by coronavirus.

But these moves are likely to prove of only secondary importance to the scale and nature of the fiscal response.

The centrepiece is an open-ended commitment from the government to provide grants covering 80% of the wages of workers at risk of losing their jobs as a result of coronavirus-related disruption, up to a total of £2,500 per employee per month. In addition, all businesses will see their VAT payments in Q2 deferred until the end of the financial year. The welfare budget has risen, including greater coverage for the

“Transactions are likely to plunge in the shortterm, as people are unable to view properties and potential sellers see no point in putting their homes on the market” self-employed, and the government and Bank of England will guarantee £330bn of lending to businesses.

As to what this means for the housing market, a temporary period of hibernation, alongside much of the wider economy, is likely.

Transactions are likely to plunge in the short-term, as people are unable to view properties and potential sellers see no point in putting their homes on the market. But ultra-low interest rates and government support for incomes suggest that forced selling won’t be a serious problem.

With housing demand and supply falling in lockstep, we do not expect any sharp correction in prices.

A period of stagnant activity and prices looks in prospect, with a bounce back once the period of crisis response has passed.

APRIL 2020

are looking into the long-term impact differently than ever before. However, Ismail highlights a recent warning by the Organisation for Economic Co-operation and Development (OECD) that further escalation of the outbreak could “cut global GDP growth to 1.5%” — half of the projected increase of 2.9% — with recovery time potentially taking many years. The fear is that this could throw some economies into the depths of a recession, but as with the outbreak itself it appears to be a case of watching this space.

THE IMPACT ON THE HOUSING MARKET According to the latest Housing Market Update by Capital Economics, coronavirus is now expected to “severely limit” housing market activity this year, with transactions and house purchase mortgage approvals falling by 40% in Q2. Despite this, the report predicts that a house price collapse is unlikely, with prices expected to fall by 3% this year before recovering in 2021.

Despite the report suggesting that the impact of the virus will be worst than previously thought, James Tucker, chief executive at mortgage technology provider Twenty7Tec believes that this the sector is still getting to grips with the crisis. “The housing market and mortgage industry are still grappling with the ramifications of the outbreak,” he says.

“The industry reacted quickly and was able to put in place some great solutions to the immediate need.

However, the challenge is akin to changing the wheels on a moving car. Each passing day has rightly brought new commitments from government that have a direct impact on our customers.”

The Bank of England’s cut to interest rates will push mortgage interest rates down to below 1.5%, which the report states will support housing demand “a little.”

However, housing market confidence is expected to be the worst hit, with uncertainty predicted to preside over the housing market in the latter quarters of 2020.

“Confidence is a huge factor in a thriving housing market,” says Hiten Ganatra, managing director of Visionary Finance. “Not only are people’s livelihoods at risk, but there is the fear of life of them and their loved ones. With previous economic challenges – such as Brexit and the General Election — there was a definite end date. With COVID-19 its anyone’s guess.”

On a promising note, the prospect of a housing price collapse remains unlikely, thanks to a three-month mortgage holiday granted to those in need by newly appointed Chancellor of the Exchequer Rishi Sunak. This encouragement is short lived, though, with Chris Sykes, mortgage consultant at Private Finance, claiming that the effect goes beyond government intervention. “The lack of buyers in combination with people unwilling to sell may keep prices high in the very short-term by virtue of lack of supply,” he says. “But this will ultimately lead to a drop in prices in the long-term as people do have to sell property for numerous reasons. This, combined with mortgage lenders reining in criteria as well as www.mortgageintroducer.com

FEATURE

COVER certain product offerings to de-risk portfolios, means buyers’ options could be further limited.”

The report highlights that, despite many parallels drawn to the 2008 financial crisis, the coronavirus outbreak has happened at a time when many lessons have been learnt, with mortgage availability more likely to be maintained and banks being better capitalised than at the time of the crisis. The report adds that “this suggests that, once the shutdown passes, a healthy credit market could allow demand to recover fairly quickly — putting a brake on any house price falls”.

Dale Jannels, managing director at Impact Specialist Finance, agrees that there is hope that the outcome will differ from 2008. “The government’s interventions have been positive,” he says. “We hope to come out of this crisis at least with some money in the economy, unlike the crash”.

“In short the housing market is about to take a hit – a significant one,” says Nick Morrey, product technical manager at John Charcol, “This is all very unfortunate, as the property market was on the verge of a long awaited upturn, especially in London and the South East, due to a strong government majority resulting in a clear direction through Brexit and trade negotiations.” However, Morrey believes that there is real opportunity for first-time buyers, and in fact it will be those downsizing who will be worst off.

For Richard Hayes, chief executive and co-founder of Mojo Mortgages, it is remortgaging that is showing strong growth through the coronavirus outbreak. “There is no doubt that the purchase market has slowed, but looking at remortgaging, April is set to be the second biggest month for mortgage maturities this year,” he says. “Despite the pandemic, there will be £21bn of loans maturing and therefore a lot of people will need to remortgage.”

Peter Joseph, chief executive at The Moving Hub, agrees that there is opportunity in these times, and it is a very different market facing today’s crisis than previously. “The shining light is that, more than ever, we are an adaptable industry with a marked increase in the number of firms adopting correct use of technology and being able to service clients’ still very demanding needs,” he says.

Despite the wavering optimism, many commentators agree that this crisis is unprecedented, with the full impact on the housing market yet to be seen. Ganatra likens the country to being on a “life support machine” with the government “taking radical steps to keep it alive”, whilst Sykes agrees that this crisis goes beyond the usual cyclical nature of boom and bust. “This is not merely market volatility and higher rates of unemployment,” he says. “This is the entire economy; people’s lives being put on hold and we do not know how long for.”

MITIGATING IMPACT There is no doubt that the industry is fearful of this → www.mortgageintroducer.com

A surveyors’ view Joe Arnold managing director, Arnold & Baldwin Chartered Surveyors

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ou know that feeling when you are at home self-isolating, binge watching a boxset, and you receive a work call, so you have to hurriedly hit the pause button – this is essentially, in my view, what is going to happen to the residential property market. It will be on pause – no supply and no demand.

My first economics lecture taught me the basics: supply and demand are the key principles to property values.

No supply and high demand = growth, high supply and low demand = decline, equal supply and demand = plateau.

While veryone is on lockdown, so too is the purchase market, although those estate agents who took up 360 virtual tours will be able to continue to show their stock.

I do not have a crystal ball and I do not know when this will end, in the same way I cannot predict house price movement. If we can contain this fast, we can hopefully get back to the new state of normality.

The longer it takes, however, the more potentially draining it will be on resources. People are likely to have less disposable income and will probably need to dip into their savings, and this could impact on the deposits that have been saved to buy property.

For those of you who know me, you know that I am a positive person and I always like to look on the bright side of life. Transactions that are already well advanced are likely to proceed, albeit with the potential of some complications around the completion date and, of course, the remortgage market remains a source of significant activity for brokers Surveyors, at this stage, are mostly on lockdown, but only from a property inspection perspective. We are still working, as are you, but just from home. The market can continue as we

use desktop valuations and we have already been advised that physical inspections will not be mandatory for many of our lender clients.

When you are placing remortgage business and deciding on your choice of lender it will be important, for the time being, to consider the valuation techniques accepted by that lender and to work with surveyors, like Arnold & Baldwin, that are able to deliver those desktop valuations.

“The market can continue as we use desktop valuations and we have been advised that physical inspections will not be mandatory for many of our lender clients” Take advantage of low interest rates to work your back book and take a proactive approach to contacting, reassuring and advising your clients throughout this difficult period. This will help to keep your business ticking over while the purchase market is set to pause.

Now is also a good opportunity to spend time refining processes, systems, and content – all of which could help businesses to emerge stronger on the other side. And, of course, it is important that you focus on what matters most: the wellbeing of your family, friends, colleagues and community.

If you are able to, think about ways you could help your community. At Arnold & Baldwin, for example, we have offered our vacant office space to the NHS to utilise in any way they would like, potentially as additional capacity for a 111 call centre.

These small steps can make a big difference, as we all pull together to emerge from this difficult situation as quickly and in as good shape as possible.

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FEATURE

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Consequences of COVID-19 Ray Boulger senior mortgage technical manager, John Charcol

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ollowing imposition of the lockdown, more and more consequences of COVID-19 are becoming apparent.

Prior to lockdown it was already obvious that purchase activity would fall dramatically; now even those who do want to buy will struggle to do so.

With surveyors no longer able to do physical inspections, and valuation options therefore limited to a drive by or desktop, it is difficult to see how any lender will be able to offer a high loan-to-value ratio (LTV) mortgage, say

“In some cases everyone involved will exercise common sense and agree to vary the contract, setting a new completion date when the lockdown is lifted” above 75%. As at least one person in any chain is likely to need a mortgage in excess of 75% LTV, and this will make completing a chain exceptionally difficult.

So once the current pipeline has been worked through, lenders will be able to re-assign nearly all staff working on purchases to other areas where customer demand has spiked, in particular enquiries about payment holidays.

However, it is not only purchase activity that will be halted but also much remortgage activity, for exactly the same reason: the inability to obtain a physical valuation.

Lenders are more likely to accept a drive by or desktop on a remortgage, and as the average LTV will be lower than on a purchase there will still be opportunities for remortgage business.

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However, for borrowers who don’t want to increase their mortgage the attraction of a product transfer is enhanced, even if a remortgage offers better value, to avoid potential problems such as the valuation, and in some cases it will be the only option.

However, the problems faced by people who want to move or remortgage pale into insignificance compared to the problems many who have exchanged contracts but not yet completed will have.

Many removal firms are already cancelling bookings, so some people will physically just not be able to provide vacant possession to their property on the scheduled completion date. Again, it only needs one person in a chain to have this problem and the whole chain is stymied, even if the others had little in the way of goods to move and were doing it themselves.

In some cases, everyone involved will exercise common sense and agree to vary the contract, setting a new completion date when the lockdown is lifted.

In this situation, some mortgage offers are likely to have expired, particularly if a new completion date is more than six months from the mortgage offer — will the lender extend the offer period? If the lender requires a new valuation that may push some offers outside LTV limits. UK Finance should provide some guidance on this.

Of course, not everyone is reasonable, and in any case some people in this situation will have been laid off or made redundant.

This mess has the potential to be a legal nightmare, with the risk of multiple breach of contract claims. It may be that, as the failure to honour the contract is due to government action, force majeure could be claimed, depending on the terms of the contract.

To re s o l ve t h i s p ro b l e m t h e government could exempt removal firms from the lockdown, specifically for removals where contracts were exchanged up to 23 March.

MORTGAGE INTRODUCER APRIL 2020

crisis, as it shakes the very foundations of the strength it has worked hard to build since 2008. The use of technology in the mortgage industry has long been in debate, but it has become more friend than foe in times such as these. “From our point of view, it’s business as usual, as thankfully we have a fully functional online system and therefore being able to operate with all our staff working at home has been relatively painless,” says Dale Jannels.

Online mortgage broker Trussle has been fully automated since it was founded five years ago and Miles Robinson, head of mortgages, agrees that this has given them an advantage in minimising impact.

“Amid these unprecedented times, we’re lucky that as an online service, we’re already fully optimised to function remotely,” he says. “This means we’re able to continue advising our customers from the comfort of our own homes to the comfort of theirs.”

The use of technology to mitigate the impact is also important to Neal Jannels, managing director at One Mortgage System; however, he warns that using the right technology is vital. “Our platform is fully cloud-based,” he says. “We can continue to build and develop our system whilst also providing a full service to our existing and new client base. However, if you are planning to switch your tech during these periods, make sure it can be used from anywhere in the world and that it’s right for your business. There’s a lot of ‘noise’ happening currently and you don’t want to be stuck with a piece of costly software that can’t grow with you on the ‘other side’.”

Tucker is seeing a new approach to property viewings as a way to mitigate the crisis, thanks to technology. “We’ve seen some virtual house viewings — operators try and take a lead and we think that that may well become normalised for house viewings over coming months,” he says.

Despite this emerging as a way of allowing the housing market to continue whilst following social distancing measures, Hansen Lu, property economist at Capital Economics, believes that the impact will be limited. “Social distancing measures will effectively put a stop to home viewings – placing the housing market on ice.”

Despite the focus on technology, and on business’ plans to mitigate the crisis, one overall agreement is around the importance for normality to resume quickly to minimise future impact. “It is vitally important for this pandemic to end and for normal life to resume as quickly as possible,” says Ganatra. “The sooner this happens the lesser the impact will be.”

WHAT THE FUTURE HOLDS The future outlook includes a mixture of cautious optimism and doubt. Tucker believes that the hard work seen from the industry to keep business as usual is testament to its current status. “If we look around at other industries, they have been decimated by the www.mortgageintroducer.com

FEATURE

COVER virus; from events to leisure, from hotels and airlines, revenues have dropped off a cliff face,” he says. “That hasn’t happened to mortgages and housing, and we’re working as hard as we can to make sure that it doesn’t hit us the same way.”

The crisis is set to have a more lasting impact than initially feared, with the Capital Economics report highlighting that the outlook for housing transactions and house purchase mortgage approvals is severe.

Expectations are that both will fall by 15% across 2020 as a whole, driven by a very sharp decline in Q2, before recovering to their current level by the end of 2021. Hansen Lu, who led the report, believes that the future impact of the coronavirus outbreak looks uncertain. “It will be at least a month before we know how badly the virus hit housing sales in March,” he says. “However, other countries that are ahead on the infection curve paint a bleak picture for what’s to come.

The hit to confidence will be key, and we expect that to last for months after any movement restrictions are eventually lifted.”

Morrey believes that this coronavirus outbreak will change the future workings of the industry, and that it will take a global community to ensure that the future looks bright. “The effect will be short-lived — in graph-form over time it will show as a sharp drop that came back in a relatively short time period rather than a Great Depression,” he says. “As a global community we should be working solidly and collectively towards that end goal.”

Morrey continues that businesses will change how they function following the crisis, helping form contingency plans which are “being tested hard at present”. “In the mortgage industry this is especially true of brokerages that are dependent on the purchase side of the market,” he continues. “Those who are guilty of not building deep relationships with their clients offering full advice and recommendations and backed up by excellent levels of customer service and contact.”

A challenge facing some brokers, according to Robinson from Trussle, is lender servicing, as surveyors struggle to access homes to value and new obstacles being faced through the crisis. This may mean automated valuations will increase in popularity among lenders in the coming months.

Peter Joseph believes that, despite the obstacles, now is the time to look at mortgages thanks to the current environment. “With rates at record lows, there will be mortgage deals available, the likes of which we will very likely not see again,” he says. Sykes points to other opportunities. “Uncertainty and being stuck at home drives people to consider their finances, and with mortgage rates at very low levels we expect to see a large number of remortgages and product transfers taking place in the coming weeks and maybe on to longer fixed terms as people think staying put and making sure they have somewhere to ride out the storm is the best course of action,” he says. www.mortgageintroducer.com

The future is about looking forward but remembering the past, which David Hollingworth, associate director of communications at L&C, believes is the best approach to take. “The improved conditions and optimism that seemed to emerge from the uncertainty that had dominated the market as a result of Brexit and the ensuing General Election seems a long time ago now,” he says. “The current situation will of course affect everyone across the country, and whilst many businesses like us will be capable of shifting to remote working to maintain service for customers, the market clearly won’t be able to simply shrug off disruption of such magnitude.”

Despite the difficulty of predicting how the housing market will react, the nervousness amongst lenders, buyers and agents alike is very much there. Ganatra believes that now the government has played its part, it is time for others to do the same. “It’s time for funders, valuers, respective trade bodies and regulators to step up,” he says.

“Never has the value of advice been so apparent, brokers are on the front line and we have been the major distribution route for most lenders. Now is the time to help us support our clients in their hour of need.”

STAYING STRONG This crisis has proven to be one of the most difficult the industry has faced in recent times, with the emphasis on consolidation and doing what is right paramount for a speedy recovery. The future remains uncertain, as does the full extent of what the outbreak will bring; still, Joseph believes the industry is strong enough to get through it. “The great lessons we have learnt from the General Election and the now certainty on Brexit is that there is a good property market there just waiting to release,” he says. “We broke through Brexit, we broke through the election and we will break through this latest crisis. Why? Because the foundation of this country is built on a strong and stable property market, from which we all benefit.” M I

LOAN INTRODUCER

SPOTLIGHT

Technology first for seconds Loan Introducer speaks to Matthew Elliott, co-founder at Nivo, to discuss what impact technology is having on the second charge mortgage market Can you explain what Nivo does?

Matthew Elliott

We make it easy for customers to communicate securely with brokers and lenders, and we remove the reliance on paper and email.

A simple way to think of Nivo is as a version of WhatsApp but built specifically for financial services.

Within it, agents can deploy a range of FinTech features such as document transfer, biometric identity verification, open banking, E-signing and bot automation services.

Do you just work with second charge firms?

We work with a range of financial services organisations but the second charge market is our focus.

It’s still hard for a customer to reach brokers and lenders and to get deals done. There’s a lot of phone calls, manual effort, paper and unsecure email – exactly the conditions that Nivo is designed to improve.

We also see huge potential in how we can help the market to grow in the future and are working with lenders to ensure our next technology developments address specific opportunities.

Is there a risk technology could make finance too easy to obtain – available at the click of a button so to speak?

With a positive mindset, I think it’s more likely that technology can help consumers to more easily access better deals from responsible lenders. It’s less about making finance easier to obtain and more about helping people get the best deal for them.

Technology like ours helps consumers to reach

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www.mortgageintroducer.com

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

I’ve always been excited by creating new things and naturally more focused on ensuring I’m fulfilled by what I’m doing at the moment than about pursuing any particular job.

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

To keep a sense of perspective and a sense of humour at all times.

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

If I’m in a philosophical mood then I’d say health, but I admit that I’d be quite lost without my Apple laptop and smartphone.

financial services companies more easily. It helps companies access higher quality customer data, share information more securely and adhere to compliance more effectively; with more transparent audit trails.

These factors should expand choice for consumers, enable responsible lenders to outcompete unscrupulous lenders and support regulators to control things more effectively.

Looking 10 years down the line, do you think there is anything else technology-wise that can be done to speed up the customer journey?

We’re excited by two developments which could transform the speed of a typical second charge loan.

First is Nivo ID Passporting that we launched with Freedom Finance and Optimum Credit. It allows for a customer to share their personal ID information with any brand on our network. This speeds deals up by days, by removing the need to repeatedly share this same data via post, email and the ‘speaks with’ phone call.

Next, we are tackling the inefficiencies between brokers and lenders in the latter stages of a deal.

There’s a lot of paperwork, fragmented lender portals and personal email for sharing sensitive documents. We’re expanding our service to allow brokers and lenders to communicate with each other and remove these inefficiencies.

Do you feel some firms are still reluctant to embrace technology, or does it just come down to budgets?

We’ve found it to be less a case of budget and more a case of building awareness of the value we deliver and growing through advocacy and referrals.

We started by working with the more visionary brokers on proof of concepts which delivered strong performance improvements.

These brokers influenced the lenders to approve our ID and E-signing because it made deals faster and safer. Which in turn meant the lenders realised the benefits, signed up, and referred us to their partners. M I www.mortgageintroducer.com

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SECOND OPINION

Considering the Following on from the recent FCA guidance Natalie Thomas asks if there could ever be an execution only model that works for seconds

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he catastrophic fallout from the coronavirus pandemic has shown just how easily unforeseen events can throw things off track – especially borrowers’ finances. Many lenders have stepped up to the mark in terms of offering borrowers flexibility with their mortgage and loan repayments and Chancellor of the Exchequer Rishi Sunak has outlined a package of measures designed to see the UK through the storm.

What happens when the dust settles, however, and the financial cost of the pandemic is counted?

Will the measures that are being taken be enough to help those borrowers who are already financially vulnerable?

Loan Introducer asks: “Are you worried about the long-term impact COVID-19 could have on borrowers’ finances?”

Stewart Simpson second charge mortgage specialist at Brightstar Financial The government is doing a lot to help protect peoples’ income levels in the short-term.

In the long-term, I would like to see lenders take a common-sense approach to assessing incomes during this period. For example, if someone has several statutory sick payments on their payslips, we want to see lenders taking a pragmatic approach if it is clear these were one-offs.

Also, mortgage lenders have committed to helping customers with payment holidays and not updating credit reference agencies; it would be good to see unsecured lenders taking a similar approach to help protect people’s credit scores, where payments have been missed as a result of COVID-19.

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Sue Anderson

Paul Huxter

head of media at StepChange Debt Charity

head of sales, Enterprise Finance

As elsewhere, our immediate focus is getting people through the short-term issues they now face.

If this crisis shows us nothing else, it’s just how fragile many people’s finances are – just under 10 million people were already showing signs of financial distress before the coronavirus crisis came along.

But yes, of course we’re worried about the long-term outlook.

The immediate response of the mortgage lenders has been impressive, offering a three-month forbearance period. But, while that buys us time, it won’t solve everyone’s problems and may even exacerbate them long term unless we come up with a very cunning plan.

Th i s i s e s p e c i a l l y t r u e w h e n we think about the wider context – offering extended overdraft facilities or emergency credit card limit increases may get people past the immediate problem of being unable to pay for their basic needs, but there is a risk that without long-term affordability planning such customers may simply be seeing their lending kicking the can down the road in terms of the financial problem they face.

This is going to need a heroic effort to get right.

The government’s rescue package will undoubtedly help – keeping more people on payroll, extending eligibility and access to sick pay and benefits and implementing business support measures will all reduce the shock over the short, medium and long term.

But the shock is still there.

The three-month mortgage holiday will undoubtedly offer help to some applicants, but those that lose their jobs will find it offers only partial relief. The industry as a whole will have to review the situation on an ongoing basis to see if longer payment holidays are appropriate, or measures such as looking to allow the client to make interest-only payments in the short to medium term may be more suitable.

Debt consolidation has always been a major driver of the second charge market and could be an option for clients struggling to service their current unsecured debts, allowing them the potential of restructuring the finance over a longer term.

As the majority of products in the second charge space carry no redemption penalties, once the situation has resolved, the clients can look to refinance the second charge.

The product can be used to grant some temporary relief.

Joseph Aston national sales manager, Vantage Finance

Naturally there are real concerns about borrowers’ finances as all industries are going to be hit by current restrictions on living and working.

Current talks of mortgage holidays and financial aid for the private rental market will help, but that will depend on how these talks manifest into action. www.mortgageintroducer.com

LOAN INTRODUCER

SECOND OPINION

coronacrisis We do see a lot of self-employed borrowers but also a lot of property professionals who rely upon their rental intake.

I worry about their repayments and income if private renters don’t get the help or cover they need and our buy-to-let landlords start to take a hit as well through missed rent.

The domino effects of this could be huge and ultimately lenders will need to come out of the other side with a common sense approach to lending and to client criteria.

The specialist lending market has always prided itself on taking a human view on cases and being dynamic and flexible through difficult times.

Now is the time to step up and ensure customers can still make it through.

Paul McGerrigan chief executive officer, Loan.co.uk

COVID-19 is having a significant impact on everyone. It’s unprecedented, so there is no data or point of reference in modern times to the impact it will have.

A mortgage is the biggest commitment most people have so it is important to help borrowers through this period as much as possible to ease concerns.

The UK government’s decision to introduce a three-month mortgage holiday offers some immediate financial relief and was an important and decisive first step. To swiftly follow this by interest rates being set to an historic low of 0.1% is a move to try and get ahead of what is coming.

It is difficult to speculate what the longterm impact of COVID-19 will be, so I won’t.

What I will say is that, based on what we have seen in the past with the global financial crisis, I am confident the market will recover in the long-term.

In such uncertain times, it’s difficult to say exactly how COVID-19 will impact borrowers’ finances over the coming weeks www.mortgageintroducer.com

and months. It’s vital not to make any rash financial decisions.

Borrowers should research their options thoroughly, take advantage of any help that’s being offered and make decisions in a measured way as information presents itself.

All money should be focused on the fundamentals in the short term: home and family wellbeing.

Consulting a professional financial adviser would be prudent. In such uncertain times it’s even more important to speak to an expert.

have any negative impacts on the client’s credit record.

Unfortunately, without a crystal ball we cannot predict how long this pandemic will go on for, however, as brokers we will be there to support and advise clients at any time when help is needed.

Any advice we give will be based on commentary from the government, lenders’ positions moving forward, and will of course always be in the best interest of the client.

Steve Walker

Alistair Ewing

managing director, Promise Solutions

owner, The Lending Channel

Clients with existing second charge loans should be treated no differently than those with a mortgage.

Payment holidays, freezing interest and confirmation that credit profiles will not be adversely affected should all be part of the solution. The bigger issue will be for those clients trying to access funding now.

Wholesale funders have already begun restricting volumes and clients working in a number of sectors, including the selfemployed, retail, hospitality and airlines to name a few, are going to find it increasingly difficult to access lending.

Jeffrey List director, Specialist Money

There are, of course, major concerns about the long-term impact of COVID-19 on borrowers’ finances.

As of today, a lot has been done by the government to assist with potential financial difficulties moving forward, and we applaud those lenders that have acted quickly and have already put in place facilities for payment holidays that will not

I doubt that most consumers, apart from those already affected in the tourism and hospitality sectors have thought through how this will affect virtually every sector. I think the impact of COVID-19 is significant for the industry and for consumers, but hopefully it will be a short-term phenomenon until the virus has passed through.

During that period lending will slow massively due to less demand and lenders constricting criteria. Brokers need to be ready for that.

For consumers, hopefully the steps taken, including to grant payments holidays, will help. We have already issued advice about reducing non-essential spending and focusing on paying all essential outgoings, plus not allowing their credit history to deteriorate, as doing so could dramatically affect the availability or cost of credit in the future.

Hopefully, prudent consumers should come through this OK, and post-COVID-19 lenders will return to their existing lending appetites, including those which accept missed payments.

However, prudence is becoming a rarity in our ‘buy now – worry about it later’ society, and I have to worry about those who have either not prepared for a rainy day or don’t even realise it’s raining. M I APRIL 2020

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LOAN INTRODUCER

PRODUCT TRANSFERS

Product transfers for s Natalie Thomas considers if there is a place in the market for transfers in the second charge sector

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enders in the second charge mortgage market are fairly innovative when it comes to their product ranges, but there is still one offering that is noticeably absent: product transfers.

The last month has demonstrated the volatility of not only the UK economy, but also borrowers’ finances – highlighting just how important it is for lenders to take a novel approach with their products.

The product transfer market has long been an established part of the first charge mortgage market and continues to gain pace.

So, could such an offering prove useful for second charge borrowers?

A SHORT-TERM FIX The make-up of a second charge has traditionally been akin to that of a short-term loan. In the main, it has been used as a short-term fix for borrowers, not a long-term solution, which may explain why product transfers are still missing from the market.

“One of the main reasons for a second charge being taken is that the applicant has a first charge too good to let go; mostly as a result of a good fixed rate with Early Repayment Charges attached,” says Buster Tolfree, commercial director, mortgages, at United Trust Bank.

“When the customer comes out of that fixed rate, they naturally seek to refinance the second charge together with the first charge,” he explains. “The product transfer market has not fully evolved for this reason.

“Most people redeem their second charge within five years, and completing a product transfer and fixing it again could create this same locked position but with a rate higher than their first charge and with a smaller balance.”

Stewart Simpson, second charge mortgage specialist at Brightstar Financial, agrees: “Generally a second charge mortgage is taken over a short number of years, typically where a client has an ERC attached to the first charge. Although this isn’t always the case, I suspect a high percentage of clients fit into this bracket and this is why second charge lenders do not believe there is enough call for this facility.”

One of the reasons the product transfer and the remortgage market play such a pivotal role in the

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first charge mortgage market is due to the need for borrowers to avoid falling onto their lender’s Standard Variable Rate once their initial fixed rate ends.

Paul Huxter, head of sales at Enterprise Finance, believes most clients do not run their second charge beyond the life of their initial fixed product rate and thus do not fall on to a reversion rate where a product transfer would benefit them.

“A second charge is designed to be a short-term solution for clients where their current circumstances mean they are unable to access traditional high street finance to meet their needs today,” he says.

“Traditionally, the second charge is refinanced away as soon as possible once the high street finance becomes available. There are numerous products available in the second charge space without ERC’s to ensure this is possible.”

Another reason why the product transfer market in the second charge industry has not yet taken off could be down to the simple fact that fixed rates have not been as prevalent in the second charge market as they have in the first.

“Fixed-term first mortgages have been around for a long time,” says Paul McGerrigan, chief executive officer at Loan.co.uk.

“As a result, the need and demand for product transfers at the end of a fixed term period emerged a long time ago,” he explains.

“It emerged as a way for lenders – and brokers to a lesser extent – to retain clients by providing a simple, hassle free process that is much simpler than remortgaging to another lender.

“Whilst not always the best option in terms of rate and product, it is the simplest way to move to a new mortgage or maintain an existing one.

“In contrast, the rise in popularity of short-term fixed rate second mortgages is a fairly recent development,” he says.

“Because of this, product transfers haven’t been needed and therefore this market hasn’t emerged.”

A QUESTION OF DISTRIBUTION The second charge mortgage market grew by 19% last year, according to the Finance & Leasing Association; could providers start to see demand for product transfers as the sector grows? www.mortgageintroducer.com

LOAN INTRODUCER

PRODUCT TRANSFERS

r seconds Marie Grundy, sales director at West One Loans, believes the emergence of a product transfer market in the second charge industry is the natural next step.

“There will be borrowers who could benefit from product transfers,” she says.

“For example, this might be borrowers who have come to the end of their fixed or discounted rate and may have also recently completed a product transfer with their existing first charge lender, meaning the prospect of remortgaging is not likely to happen in the immediate future.”

Grundy thinks it will ultimately come down to whether lenders in the second charge market have a desire to go down the execution-only route.

In 2019, some 1,195,200 first charge mortgage holders switched products with their existing provider (1.4% more than in 2018), representing £167.4bn of mortgage borrowing refinanced internally, according to UK Finance.

Of this, 662,700 (6.9% more than in 2018) were conducted on an advised basis and 532,400 (4.8% fewer than in 2018), worth £70.4bn, were on an execution-only basis.

Grundy says: “The debate about the merits of execution-only versus advised sales for product transfers is one that will ultimately determine if second charge lenders have the capability and appetite to offer this service.

“I believe it is only a matter of time before this service is extended to existing borrowers.”

Product transfers have many advantages over a traditional remortgage.

They are not only usually quicker but can allow borrowers to keep their original terms – such as interest-only. In terms of a second charge, a product transfer would allow the client to avoid most of the fees that go alongside obtaining an entirely new second charge with a new provider.

Product transfers, however, have not been without their critics, mainly due to some first charge lenders’ tactics of cutting out the broker and encouraging the client to deal directly with the mortgage lender.

Over the last couple of years, mortgage brokers have started to gain recognition amongst lenders – the majority of which will now pay brokers a procuration fee for retention cases and don’t actively look to cut out the broker. Nevertheless, a broker usually earns more from a product transfer than a remortgage.

“Most second charge mortgage lenders have relied even more heavily on introducers for their distribution so they have, up to now, not looked to develop www.mortgageintroducer.com

products and marketing strategies that compete with their distribution,” says McGerrigan.

“Like many things in both the first and second mortgage markets, technology will change the status quo. So perhaps as new web platforms and mobile apps evolve and fixed term periods in second mortgages come to an end, we will see a product transfer market emerging.”

IN IT FOR THE LONG RUN Another factor that could contribute to the emergence of product transfers in the second charge space is the lowering rates the market has experienced over the last 12 months.

“As second charge rates and fees have continued to reduce, they have become more mainstream in their application due to high street lending restrictions, so there is now greater potential that applicants may start to view them as a longer term solution to their finance needs,” says Huxter.

“As this starts to happen, product transfers would then be valuable, as they have been in the first charge market, to ensure clients have a preferential rate on the product going forward.

“Where a client’s circumstances change to the extent they cannot access traditional lending to refinance the second charge, a product transfer would be valuable to ensure the client does not have to fall on to a reversion rate, but maintains a preferential deal ongoing in the second charge space.”

Simpson believes that as long as clients are not penalised with rate loading on ERCs, there could be a call for product transfers – especially in today’s uncertain economy.

“I recently spoke to a client who ideally wanted a fixed rate for two years, but did not know whether they would be able to remortgage at the end of the term due to uncertainty in property growth,” he says.

“They are, therefore, taking the longer-term fixed rate to avoid paying additional fees to refinance the second charge.

“Having the facility to product transfer would give clients in this position the benefit of the lower priced fixed rates with the safety of being able to product transfer if the two-year plan doesn’t work out.”

The uncertainty around property growth that Simpson mentions is expected to escalate in the current pandemic environment.

There is a strong chance that an increasing number of second charge borrowers may not be able to remortgage back into the first charge market as early as they had hoped.

While the product transfer market might have a reputation for cutting out the middleman, this doesn’t necessarily have to be so, and with a strong relationship between distributors and lenders in the second charge space cemented, product transfers could be a win-win for everybody. M I APRIL 2020

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SPECIALIST FINANCE INTRODUCER INTERVIEW

DEVELOPMENT FINANCE

Why development finance might not be the same again Ashley Ilsen CEO, Magnet Capital

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hey say the construction industry is the first to enter a recession and the last to exit. I use the ‘R-word’ reticently in that we are nowhere near understanding the true implications of the current COVID-19 Crisis, on values and on the wider property market.

The last few weeks has seen various lenders pull product ranges, with development finance being one of the hardest hit sectors.

However, as of the time of writing government guidelines do not prohibit construction or activity on construction sites, as long as public health guidance is being followed.

In fact, across many of Magnet Capital’s development schemes that we are funding, progress is still excellent.

We are seeing a hardnosed resilience that was perhaps born out of the destitution of what many builders and construction firms went through after the 2008 crash.

Just today I conducted a wonderful virtual inspection of a large site we are funding in Kent which was full of activity, with an appropriate number of tradesmen on site that are respecting the social distancing guidelines.

Naturally, we do have a handful of clients that have closed their sites and in many cases this has predominantly been down to our clients need to protect vulnerable relatives at home.

We have also seen many complaints about supply chain which the government is yet to sufficiently address and could cause further disruption beyond the coronavirus crisis. www.mortgageintroducer.com

Beyond all the usual struggles for SME builders and developers, access to appropriate development finance will now become a serious issue. I say appropriate because for every quality development finance lender, there seems to be a handful trying to cut corners in our market.

CONSISTENCY

The landscape for development finance has changed dramatically in recent weeks but the one thing the development finance sector needs now more than ever is consistency.

Having what I call a ‘Hokey Cokey’ approach to financing, where lenders decide to be in one minute and out the next, can be hugely detrimental to our sector and reputationally damaging.

Consistency is key because it breeds confidence, which in turn trickles down from our brokers to the consumer.

The development finance sector has come a long way since the 2008 crash

and indeed since I joined the market in 2012.

It’s a small world and I really enjoy sharing thoughts with competing lenders and being able to speak candidly with our broker partners.

One thing I think we can agree on is that this is very much a pull-up-yoursocks moment for the development finance industry.

At Magnet Capital we have always been known as being a cautious lender and years of being conservative in our lending means that we are currently in a very strong position to serve our brokers and our clients.

LIQUIDITY

Having a sudden nose-dive in liquidity in the sector will undoubtedly cause serious problems for the wider property market far beyond the coronavirus crisis. Let’s keep doing what we’ve doing for years and continue to back the construction sector; they’re going to need it. M I

The development finance sector has come a long way since the 2008 crash

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NETWORKS

Curating a panel is not restrictive Shaun Almond managing director, HL Partnership

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he search for equality seems to permeate all aspects of life, including the mortgage market, where we start from the assumption that all lenders are the same.

The overriding consideration by which every regulated entity operates is that the customer must, to the best of an adviser’s knowledge, have a suitable outcome. This means reducing the risk of financial detriment by delivering a borrowing solution that meets the needs of the customer’s circumstances not just today, but for the life of the mortgage.

Brokers, by and large, base their

choice of lenders on an initial sourcing system check, and then use their own experience to decide on a shortlist of potential funders. This hands-on experience understandably will inform the final decision as to which lender to finally choose for recommendation.

One criticism that networks face, unfairly in my opinion, is that their lender panels are restrictive and don’t allow ARs the flexibility to choose.

Networks help the adviser by ensuring they have access to lenders whose product criteria holds no surprises, whose complaints record doesn’t demonstrate poor service and whose criteria offers value for money.

If this means filtering over 100 lenders down to a panel of 50 that have demonstrated that they can support the adviser with training and expertise, ultimately enhancing the customer experience, then the panel process

works. Advisers do not have the time to do due diligence on every lender in the market, and frankly they can’t go as deep as we in the network can.

With such a large proportion of mortgage customers being served by a small number of lenders do networks really restrict an adviser’s choice?

Most networks have an offpanel process where lenders can be approached for one-off deals therefore giving the adviser and customer an added layer of security.

So, whilst it can be OK to simply say that because the Financial Conduct Authority has granted its permissions the lender is OK to use, network intervention can be a huge positive. It understands the adviser base it works with and their customer demographics, which in turn encourages and, in most cases, delivers the right customer outcomes. M I

BRIDGING

The power of positive thinking Brian Rubins executive chairman, Alternative Bridging

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he government has reacted with meaningful financial support to offset the effects of coronavirus, alongside a massive £600bn infrastructure to boost the UK economy. So, should we pull up the shutters or put out the flags? Until proven to the contrary, it is a time for the bridging industry to think positively – to be careful, but to look for the opportunities.

For established, experienced lenders, it can be heads down and steady as you go. For those that have entered the market more recently, it might be spooky! Times are changing. The

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possibilities for problems are endless. At the same time, there are opportunities; the need for alternative financing by the property industry, business community and homeowners is more urgent than ever.

When it comes to pricing, there is no argument for lenders to increase rates and the 0.5% drop in Bank of England Base Rate provides reason to reduce interest rates for better quality loans. At the same time, innovation must continue, with lenders doing all in their power to improve service, shorten completion times and support the brokers that support them.

It is a time to be flexible but prudent, and the bold will succeed. It is the time for more flexible underwriting, underwritten by people not algorithms, for commercial term loans to refinance short-term arrangements. Just because all the boxes cannot be ticked, this

should not be a reason for declining an application. It is the time to listen, learn the facts and make positive decisions.

Those who have recently entered the residential development finance market, or are about to do so, might want to think again. It needs skills and experience, but for those with these qualities, it can be business as usual or better. First, the shortage of homes will not be quickly resolved, delivery of new products will be approximately a year away, hopefully long after the coronavirus problem is behind us, and who knows, maybe the government will further stimulate the market and maintain the current Help to Buy programme when it expires.

Yes coronavirus is a problem, but we have survived worse in the past. This is the time for the brave to be bold and to recognise the power of positive thinking. M I www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER INTERVIEW

ADVICE

Advice is now more important Alex Hammond director, Mortgage Market Alliance

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ne of the many lessons that the coronavirus crisis has taught us is the enormous appetite for individual financial advice based on people’s specific circumstances.

Every time the government has made an announcement about new economic support measures, radio phone-ins, experts on television and internet forums have been inundated by people wanting to know exactly what course of action they should take.

This is, an extreme situation in which we all have questions, but it highlights the scale of demand from the public for advice that addresses their situations.

As we emerge from this crisis,

everyone’s finances will have been impacted in some way and the concept of a vanilla case will apply to a smaller number of borrowers than ever before.

Quite simply, more people will have more to gain by seeking professional mortgage advice. There’s even a chance that we could see a spike in demand by the end of 2020.

According to analysis by Savills, the central scenario for most economic forecasters is a sharp, short economic contraction in Q2, followed by a rebound in late 2020/early 2021.

Savills also expects the current suppressed transaction activity to lead to a build-up of latent demand, and that the experience of working from home for an extended period of time will drive many households to move.

There is reason, then, to be positive about the medium-term prospects for the market; this should provide some comfort as we rightly focus on adhering

to government guidelines and keeping ourselves, our family and our colleagues safe in the short-term.

For our part, at the Mortgage Market Alliance, we will work tirelessly to communicate that the market is open for business, has a strong appetite to lend and is highly competitive, and that the best way to access everything that it has to offer is through professional, independent advice.

We are working through one of the most difficult periods in all of our professional careers and, against the backdrop of this pandemic, there are times when you could be forgiven for feeling a bit helpless. But there are reasons to be hopeful, and as we return to a new sense of normality, the intermediary mortgage market will be well placed to help people get their finances back on track and contribute towards the country’s economic recovery. M I

SPECIALIST FINANCE INTRODUCER

FIBA

We are better off working together Adam Tyler executive chairman, FIBA

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know there will be little argument if I say that these are difficult times.

For firms big or small, whether residential advisers or specialist commercial finance brokers, we are all facing the same issues of uncertainty not only over how we are going to cope for our families and loved ones, but how we are going to get through with our businesses intact.

The one thing I know for sure is that there is still a demand for all types of finance, and among small to medium enterprises that demand has not suddenly dried up, despite the sense of unreality and worry caused by COVID-19.

Advisers still have a crucial role to play. The sector needs our help and specialist finance advisers are in the right place to provide that support.

Primarily, we need to be thinking ‘smart’ where we can, and that means adapting the way we work. Faceto-face meetings are now out of the question.

However, using Facetime, Skype or any of the meeting apps available online is a tried and tested, low cost option.

We must embrace technology options where we can see they benefit us and our clients.

This is a golden opportunity to work differently and will provide us with a facility to continue doing what we do best.

Equally importantly, we are definitely better working together rather than on our own. It is time to think about circling the wagons and becoming part of a trade body.

If you have already considered it but chose to stay as you were, this could be

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a good time to reconsider.

While I believe passionately that our trade body, FIBA, should be a focal point which represents members and champions the SME sector in the wider world, it is far more than a just a representative body with a comforting logo for members’ letterheads.

It is a truly dynamic organisation offering members real practical support including access to a growing and properly vetted lender panel, an innovative professional indemnity block policy scheme and a world class comprehensive compliance package.

From my past experience, I also wanted to ensure that FIBA members have access to the best sources for legal, insurance and surveying expertise with hands on experience of the commercial sector, which led to the setting up of our professional partners panel.

It made perfect sense to include them as part of the Financial Intermediary and Broker Association.

WIDER PERSPECTIVE

Their addition to our membership has given us a wider perspective across the whole industry and has allowed us to take on board thoughts, opinions and requirements that have helped us better shape our plans for specialist property finance.

These plans are for the benefit of the whole industry and of course all our customers, both those of our broker members and our lender partners.

But at a practical level, what real difference has it made? I can confirm that commercial property transactions have been concluded successfully that otherwise would have failed to complete because members have chosen to work with our professional partner panel.

It is a bold statement, but having legal firms on both sides which fully understand what a bridging, development finance or commercial

mortgage transaction entails means that a successful conclusion is a much more likely result. Our professional partners panel is a crucial innovation in our sector and the original resource from which members can source a law firm for their customers.

We are proud to have been the leaders in setting up this vital service; it continues to grow and evolve and we welcome new firms which have been vetted and provide the service our members and partners expect.

That is not to say that any legal firm should not be involved, but in the main we rely on the speed of the process; a firm that is less familiar with the

“We are all facing the same issues of uncertainty not only over how we are going to cope for our families and loved ones, but how we are going to get through with our businesses intact. The one thing I know for sure is that there is still a demand for all types of finance, and among small to medium enterprises that demand has not suddenly dried up” intricacies of commercial lending is going to hamper the outcome.

FIBA wants to make space to teach and encourage new firms into the industry, so that we continue to service a specialist property finance sector that might be challenged at present but will thrive again when the economy recovers.

Being a FIBA member gives you the tools and support you need to provide the advice SME owners need in today’s market.

With access to a constantly growing lender panel, a unique professional partners panel including the most experienced law firms and surveyors working in our sector, and the backing of SimplyBiz Group, FIBA members are very well equipped to help business owners during these difficult times. M I www.mortgageintroducer.com

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COUNTRY IN CRISIS

FRONTLINE

From the frontline

Iquam nocum amqua pripimpl. Deconsit; ia moveheb atius, escritam nonsu conderf ercesenis vit, qui pro vividem ovehenatam a publii The stories impacting the industry during the coronavirus crisis

Help feed the NHS

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s the coronavirus (COVID-19) crisis continues to grip the UK Mortgage Introducer has linked up with foodto-go business SushiDog to help provide meals for hard-pressed frontline NHS staff.

SushiDog is run by Greg Ilsen, brother of Magnet Capital CEO Ashley Ilsen, who has pivoted his business to help those who spend their time selflessly helping others.

Based in London SushiDog specialises in made-to-order sushi burritos and poke bowls. Since the onset of the crisis SushiDog has been delivering food to NHS staff at both Barnet Hospital and UCLH. It is now looking to roll the scheme out to Watford General and Northwick Park Hospitals.

Ilsen said: “We have been delighted to hear that the SushiDogs we delivered for the NHS staff at both Barnet Hospital and UCLH were so well received and gave them a much-needed boost.

“Both hospitals have told us that receiving deliveries of food and other items really makes a huge difference to those NHS staff caring for people suffering from coronavirus.

“We would be extremely grateful for any donation at all that could help contribute to the supplies for us to prepare the SushiDogs each day. It really does have a positive impact.”

You can help SushiDog help feed the NHS by donating at bit.ly/sushidogs

In memory of Dean Mason It’s with sadness that we have to report the passing of Dean Mason.

Mason, founder and director of Mason Financial Planning, leaves behind a widow and a young family.

He sadly passed away on 3 April from coronavirus (COVID-19).

A mortgage and protection adviser, Mason started out at Nationwide in the 90s as a an adviser before moving LifeSearch in 2003. He went on to found Masons Financial Planning in 2009.

Mason was a regular commentator in Mortgage Introducer and a well know and liked figure in the industry.

Our thoughts are with his family and friends at this saddest of times.

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An update on Mortgage Introducer

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ver the past few weeks, Mortgage Introducer has seen unprecedented levels of activity from brokers seeking information and reassurance from the market.

With engagement on www.mortgageintroducer.com doubling in recent weeks, we want to do more to support our community of intermediaries. That’s why, we are asking YOU – the industry – to stand with us and continue to communicate your messages of positivity and support out to the market. Brokers are actively seeking guidance and it has never been more important to stand together and send out a strong message - we are here for you. We understand that the current situation does not necessarily lend itself to product-led initiatives, but we also know that there are a lot of good positive things happening out there at the moment, with lenders offering brokers reassurance with service-led messaging during this adjustment phase. Let’s stick together. www.mortgageintroducer.com

Part of the Mortgage Introducer family. @MortgageChat | Mortgageintroducer.com

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To appear in the next issue of Bridging Introducer, contact us today.

Maa Bond Commercial Director Maa@mortgageintroducer.com 07525 456869

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