Mortgage Introducer February 2021 by mortgageintroducer

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

February 2021

£5

LIFE AFTER COVID

What will the market look like after the crisis? and make your steps count

Walk 200k steps** in February for the chance to win a brand-new Peloton Bike+* Prize includes a Bike+ basics model. Monthly subscription packages are not included. ** Submitted evidence of either the total number of steps taken or the average daily amount walked during February will be required. *

Barclays Bank UK PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct. Authority and the Prudential Regulation Authority (Financial Services Register No. 759576). Registered in England. Registered No. 9740322. Registered Office: 1 Churchill Place, London E14 5HP.

For intermediary use only

Call us today on 01634 888260 Or visit krfi.co.uk For intermediaries only

EDITORIAL

COMMENT Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com Associate Editor Jessica Bird Jessicab@sfintroducer.com

Ryan Fowler

Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com

RyanFowlerMI

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

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

Teaching the value of advice

here have been some strange moments and trends in the past few years, the latest of which is the WallStreetBets (WSB) trading phenomenon. For anyone who has been under a rock for the past few weeks, the story centres around US videogame and console retailer GameStop (GME), which has seen its shares go for as little as $2.57 per share in April to as much as $483 at one point. At those levels, GME has gained roughly 18,700% since the spring. This was fueled by WallStreetBets, an anarchic community of online day traders based on Reddit. The traders triggered a short squeeze causing losses on short positions in US firms topping $70bn. This also saw the group’s member count increase threefold to 8.7 million. A whole generation of young people have now flocked towards the stock market and are talking of staying. It’s interesting that so many people have been happy to engage with big

finance, but the main driver appears to be greed, rather than interest. For many, based around the world and not just in the US, they have lost thousands. Student loans, pensions, savings and rents were all gambled on a volatile stock. This, in part, was fueled by the gamification of trading through apps like RobinHood. By making stocks free to trade and removing the broker from the equation, it opened up the market to all. It also magnified the risk to those involved, however. The winners may now sit on thousands, and in some cases millions, in profits, but for some losers they face the prospect of diﬃcult financial situations for what could be sometime to come. There is a value to advice, and it needs to be recognised. It’s clear that younger generations prefer ease of use to actual advice. The financial market, including the mortgage world, needs to find a way to educate people on the true value of advice. M I

WE’RE GOOD WITH ODD buy to let cases www.mortgageintroducer.com

01634 888260 | krfi.co.uk

FEBRUARY 2021

MORTGAGE INTRODUCER

MORTGAGES FOR THE SELF-EMPLOYED.

JOB DONE OUR FLEXIBLE LENDING CRITERIA MAKES THINGS EASIER FOR YOUR SELF-EMPLOYED, CONTRACTOR AND FREELANCE CLIENTS No restrictions on professions Multiple income streams considered Affordability based on one year’s accounts Limited Company available on all Buy to Let products

Visit www.kensingtonmortgages.co.uk/make-it-happen or call us on 0800 111 020 THIS INFORMATION IS FOR INTERMEDIARIES ONLY

#JobDone

Kensington and Kensington Mortgages are trading names of Kensington Mortgage Company Limited. Registered in England & Wales: Company No. 03049877. Registered address: Ascot House, Maidenhead Office Park, Maidenhead SL6 3QQ. Kensington Mortgage Company Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 310336). Some investment mortgage contracts are not regulated by the FCA.

KMC/DM/0061/001/JAN21/MI

IT'S TIME TO COME TO KENSINGTON

MAGAZINE

WHAT’S INSIDE

Contents 7 9 14 15 16 18 19 21 24 30 35 38 38 42 44

AMI Review Market Review London Review Lending Review Networks Review Recruitment Review Service Review Education Review Buy-to-let Review Protection Review General Insurance Review AML Review Technology Review Equity Release Review Conveyancing Review

ROUND-TABLE

BUY-TO-LET

46 The Outlaw The latest from our resident outlaw 50 Feature: After COVID Natalie Thomas looks at the long-term impact on the mortgage market, and asks what changes we will see once the COVID-19 crisis finally abates 56 Cover: Round-table We look back on the recent Mortgage Introducer round-table, which considered the ongoing stamp duty saga, helping underserved customers and the rise of green mortgages 62 Loan Introducer The latest from the second charge market

KMC/DM/0061/001/JAN21/MI

64 Specialist Finance Introducer Development finance, bridging finance and FIBA

www.mortgageintroducer.com

BRIDGING

PROTECTION

FEBRUARY 2021

MORTGAGE INTRODUCER

S E R D N LE N ITED U We’ve scored a huge win for you now we’re part of Shawbrook Bank Our signing with Shawbrook Bank means we can make everything we do, even better. We’ll be investing to expand our range and enhance our service to tilt the playing field further in your favour. United we stand with you, helping you score more clients and making it easier to get them into the home of their dreams.

Visit themortgagelender.com/shawbrook/ to explore more about our fantastic partnership For intermediaries only

REVIEW

AMI

The new regulatory worry Robert Sinclair chief executive officer, AMI

t was early in November 2020 that Caroline Wayman, chief executive and chief ombudsman at the Financial Ombudsman Service (FOS), sat in front of the Treasury Select Committee (TSC) to be challenged by Chair Mel Stride and other MPs on the service’s work. For anyone that has not watched or been involved in any of these sessions before, it is not a particularly pleasant experience for those giving evidence. However, it is democracy in action, and a wholly necessary process to examine and scrutinise in greater depth public bodies such as FOS that, in this case, are funded by fee-paying firms. It is the only place where our regulatory bodies can be held to account in public. Having watched the session, it was disappointing that it did not fully address the issues around FOS timeliness of complaint handling, and specifically how many complaints are sitting in the pipeline as an overhang from previous years. The lack of detailed responses demonstrated either a lack of knowledge or a desire to keep a veil over the problems. AMI is concerned about the lack of transparency in this area, and has

previously requested data directly from FOS on outstanding complaint levels, only to be told that the data hadn’t been published that way for open cases. Now we understand this reluctance, as a series of letters between Caroline Wayman and Mel Stride published recently laid bare the backlog. As of 26 November 2020, there are just over 5,000 open – non-payment protection insurance (PPI) FOS cases which are more than two years old. That’s 5,000 consumers – and firms – that are awaiting a conclusion and unable to move on with their lives. AMI has called on FOS to publish more details on the age of complaints as part of its annual consultation, but it’s a shame that this information had to be dragged out of it, and only once probed by the TSC. Whilst nobody anticipated that a global pandemic would wreak so much havoc on our lives, the fact that FOS hasn’t made the headway it wanted on resolving complaints cannot be totally attributed to COVID-19. It seems that delays have been an escalating problem. This has been caused by, we suspect, a restructuring of the organisation in 2016, with a shift away from core specialisms to a structure where investigators are able to pick up a large proportion of any casework after completing a six-month academy training. We wouldn’t expect advisers to be a jack-of-all-trades, as financial products and associated

advice is complex, so why should FOS use this approach? Is this why at the end of November there were also 37,689 cases that had been with the service for more than eight weeks and were not yet allocated to an investigator? Stride said in a recent interview with BBC Radio 4 that FOS, “needs to sharpen up.” It’s clear that urgent improvements are needed, as the wider implications of the delay in dealing with complaints are significant. AMI is concerned that delays elongate the time where poor firms are continuing to advise and sell, making it more likely that the firm will fail due to the number of cases that build up – an iceberg which silently grows with no one aware of the disaster lurking beneath until it hits and causes waves. The industry was dealt a blow when the Financial Services Compensation Scheme (FSCS) confirmed that compensation costs will rise to £1bn this year, a figure that leaves me saddened. AMI considers that FOS delays in case handling are likely to have contributed to this increase, while it also leaves a huge concern that there may be more lurking amongst the backlog. Complaints that will be found justified against firms could eventually hit the FSCS. The sharpening up and speeding up needs to happen now, as the firms that pay for the service deserve a fair deal. M I

Doomed by failure

he FSCS has set its funding requirement for 2021-22, with the total amount to be invoiced rising to £1.04bn. This is because the life distribution and investment intermediation class and the investment provision class have breached their threshold maximums. Total costs in those two sectors are £705m, with a maximum chargeable of £440m. This triggers the ‘Retail Pool’. The balance is therefore shared in proportion across the other classes.

www.mortgageintroducer.com

This means that the amount to be levied on mortgage advice firms will be for their share of £22.9m, based on mortgage income, and their share of £146.8m, based on general insurance and protection commission income. In the 2020-21 plan, the initial amounts levied and received were £2.0m and £24m, respectively. This allows us to infer that it is likely that the amounts to be invoiced to firms for the 2021-22 FSCS costs will be broadly 10 times the amount invoiced

in the annual Financial Conduct Authority (FCA) invoice for 2020-21. AMI continues to express its extreme concern over escalating costs. This is demonstrable evidence of clear failure in both authorisation and supervision by the FCA, and as chief executive of AMI I am incandescent with rage. It is a dark day when an industry will have to pay £1bn for fraud and bad advice. It is wrong that good firms are paying for the regulator’s failure to do its job.

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

MARKET

Market optimism shows resilience Craig Calder director of mortgages, Barclays

he mortgage market could never be described as boring. For lenders, there are always circumstances and scenarios which test us, from funding to risk, and from updating systems to constantly trying to improve how we service the needs of our intermediary partners. Then there is everything in between. As an industry we’ve had many ups and downs, although the past year has provided challenges we have never experienced before. At the time of writing, we may still be in a national lockdown, but the housing and mortgage markets continue to find innovative and bespoke ways to support a range of borrowing requirements. PAYMENT HOLIDAYS

One of the biggest initial hurdles faced by lenders in 2020 was the introduction of mortgage payment holidays. This government-led initiative provided vital support for large numbers of homeowners in their time of need. However, it was aimed at being a temporary measure and it was good to see recent industry analysis from UK Finance highlight that eight in 10 customers have now returned to making full repayments after taking this holiday. There were reported to be 130,000 mortgage payment deferrals in place at the end of December 2020. This means that that one in 84 mortgages in the UK were subject to a deferral at the end of last year, compared to one in six in June. The number has been broadly stable since late October, following a peak of 1.8 million in June 2020. As outlined by UK Finance, the banking and finance industry remains www.mortgageintroducer.com

restrictions in terms of criteria, location and distribution, but it’s highly encouraging for borrowers and intermediaries to see a growing number of lenders extend their 90% LTV offerings.

fully committed to supporting mortgage customers facing financial difficulties with new or extended payment deferrals and tailored support. This is an ongoing process, and it’s important for borrowers and intermediaries to realise that lenders will continue to listen, evaluate options and work out short, medium and longerterm solutions where possible. PRODUCTS

What has also proven to be a tricky balancing act is servicing the changing borrowing requirements from a product perspective. Thankfully, we are operating from a robust lending platform, which has allowed many lenders to gradually increase lending appetites, even at some of the higher loan-to-value (LTV) levels. This was emphasised in recent data from Moneyfacts, which suggested that the availability of all mortgages had reached its highest level since April, while the number of 90% LTV deals has escalated to June 2020 levels. Its UK Mortgage Trends Treasury Report showed that the number of residential mortgage products rose for the third consecutive month to 2,893. This was the highest total availability Moneyfacts had recorded since April 2020 (3,192) when the pandemic’s effects began to take hold. However, the data for January 2021 showed the greatest increase in availability was at 90% LTV, where product numbers almost doubled from 72 to 160 – the most recorded since June 2020. The report also highlighted that borrowers with higher levels of equity or deposits had seen an improvement. Availability at 75% LTV also rose to 629 deals, the most since July 2020. Choice and competition – aligned with risk and responsible lending practices – are all vital components when it comes higher LTV lending. Inevitably, there remain some

CONFIDENCE

This increased lending activity, strength and overall performance of the mortgage market over the past nine to 12 months has certainly helped to bolster confidence levels. The latest report from the Intermediary Mortgage Lenders Association (IMLA) reflects this, with the trade body predicting an increase in gross mortgage lending to £283bn in 2021, together with a swift return to household spending as COVID-19 lockdown restrictions are eased. IMLA’s New Normal report, which makes a number of predictions about the market over the coming year, observes that household finances generally remain robust and will continue to weather the current economic volatility. Unlike previous financial crises, the unique government support package provided since the start of the COVID-19 crisis has helped the majority of households to maintain financial stability. These predictions follow data which showed that, in addition to the significant drop in mortgage payment holidays, the number of mortgages in arrears of three to six months continued to fall in the third quarter of 2020 – to just 0.28% of all loans, the lowest figure since current records began. This combination of factors suggests that the UK’s mortgage market is not set to face an arrears crisis in 2021. I echo IMLA’s sentiment that there is room for more optimistic thinking in 2021. From our conversations with various intermediary firms this is certainly reflected in their outlooks, and while challenges do remain for all links in the mortgage chain, a year of modest growth appears to be on the cards. When you consider what we’ve all had to endure in recent times, being able to look ahead with any kind of optimism illustrates just what a resilient marketplace we are operating in. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

MARKET

Welcome to 2021 Martin Reynolds CEO, SimplyBiz Mortgages

hilst it hasn’t been the greatest start to the year – and January felt like the 13th month of 2020 – there are things to be positive about. We need to consider how we manage our businesses through these opportunities and challenges. As someone said to me recently, it feels different to last year, where it felt we were running away from something; this year it feels like we are heading towards something more positive. This is my first column for a number of years and it’s great to be back. There’s plenty to talk about and, whilst I’ll never be as controversial as The Outlaw, I will aim to cover many topics during the year, and I’m always happy to pick up the mantle if people have subjects they want me to discuss. Whilst I was away, I had the great honour of being the chairman of the Association of Mortgage Intermediaries (AMI) for three years. Having stepped down at the end of last year, it felt the right time to dust off the biro and get back to writing. If I may digress slightly at this point, being involved so closely with AMI over this period has made me even more aware of the fantastic work that they do, and of the dedication of Robert Sinclair and the team. Robert writes a regular column in this magazine and it’s always thought provoking. I would recommend that any firm which isn’t a member of AMI, seriously consider providing its support as we’re definitely stronger together. More details can be found on the AMI website. So, back to the present. I want to pick over a number of areas during the course of the year that cover the spectrum of our market. I will also be asking some of the wider SimplyBiz

Mortgages team to contribute to these thoughts, as I always feel that it’s better to hear from the actual experts in specific subjects rather than just the mouthpiece every month. So, what areas can you expect to hear our views on? From a general market point of view there will always be the challenges around the vagaries of service and underwriting. Having been an underwriter in a previous life, I definitely have views on this. Tech will always be high on the agenda. Will 2021 actually be the year of technology? I hope so. Last year saw a huge adoption of new digital ways of working – most notably Teams and Zoom – but these often felt like a reaction to a problem. It will be interesting to see how these develop and embed into the market from a position of clarity and informed choice. From a compliance perspective there’s the Senior Managers and Certification Regime (SM&CR) and vulnerability, which raises the question, in a post-COVID world with so many people affected, is the market doing enough to assess the vulnerability of consumers – be it financial, mental or physical health? In the protection and general insurance (GI) arena there’s still more

Opening the door to 2021

MORTGAGE INTRODUCER FEBRUARY 2021

we can do, and more distributors can do to help advisers. The later life market will be under the spotlight more than ever this year. The digitisation of the full mortgage journey needs to be examined and fully debated with all stakeholders. Diversity, equality and inclusion is also a hugely important area of focus which has seen some good strides made, but there remains more to do. So, plenty for us to get our teeth into. Finally, I wanted to finish on a positive about where business opportunities lie this year. We’ve read many thousands of words on the 31 March cliff edge following the Stamp Duty Land Tax (SDLT) holiday. Will the holiday get extended? Or – as rumoured in the national press – will it get extended under the guise of a realignment in the budget on 3 March? Whatever the outcome, will there really be a drop in business levels and opportunities? I don’t think so. From a purchase point of view, first-time buyers have missed out in the main during the past eight months, due to the dearth of 90% loa-to-value (LTV) products. However, we are now seeing these products consistently return from a number of lenders. With that comes a confidence that maintains the flow of first-time buyers. Landlords that intend to expand their portfolios will continue to buy, as the costs are built into their business models and the SDLT exemption was just an added bonus. Finally, there are many people who have made the decision during lockdown that they want to move. Again, whilst the SDLT saving would be a positive, it is not a deal-breaker. If we add that this is the largest product cessations year for a while, with particularly big months in April, June and October, then the opportunities to help clients either with product transfers or remortgages should mean the market is as busy as ever. Welcome to 2021, the year of positivity and opportunity, tinged with reality. M I www.mortgageintroducer.com

REVIEW

MARKET

Don’t gamble with home insurance Chris Griffin Xxxxxxxxxx managing xxxxxxxxxxxxxxxx, director, Safe xxxxxxxxxxxxxxxx & Secure

n the current climate, many homeowners are reviewing their bills and outgoings and tightening their belts. As a direct result, cancellations of home insurance are on the rise. Many feel they cannot afford to keep their home insurance going and have cancelled the monthly direct debit. What they don’t realise is that this is a breach of mortgage conditions, and they are gambling with their biggest purchase – their home. Shockingly, more than five million households in the UK have no home insurance and are in breach of their mortgage conditions. This means that nearly 25% of all homes are currently without insurance. The main reasons for not having insurance are as follows: they can’t afford it; it’s not worth the hassle; the worst won’t happen to them; they will do it later, in the future; and they thought they were insured until they tried to claim. The change in current weather conditions means people are leaving their homes at risk from flooding, fire or explosion. If their home was destroyed, they could be left homeless with no insurance to pay for repairs or to rebuild, but yet would still have an ongoing legal obligation to continue to pay the mortgage for 25 years, with big monthly payments but no house to live in. Mortgage advisers play a vital role in making customers aware of the importance of home insurance, and helping them to arrange the right level of cover. Having spent two or www.mortgageintroducer.com

three hours with the client, helping and advising on the correct mortgage and protection cover, another 20 or 25 mins working through home insurance choices and forms is often not appealing. Nevertheless, it is still vital to protect the client’s biggest purchase – their home – so if you don’t want to give advice and do the necessary

paperwork, perhaps consider referring to a home insurance specialist. Many people simply do not realise they have no current cover and have let the original policy lapse until they need to make a claim. People who have paid off their mortgage are even more likely to let this happen in error, and are the most at risk. Financial advisers have a duty to of care; they need to get the message across when reviewing a client’s protection and make sure adequate cover is in place for the home. Quite simply, homeowners just can’t afford not to have a roof over their heads. It is now just as important as life protection. M I

Mortgage advisers have a duty of care to ensure clients have adequate cover in place

FEBRUARY 2021 MORTGAGE INTRODUCER

Why Refer Ho m

01332 200 888 safeandsecure.co.uk

o me Insurance? We deal with the... Selling Paperwork Compliance Admin Complaints

HOME INSURANCE

REVIEW

MARKET

The Chancellor’s choice Robin Johnson Xxxxxxxxxx managing director, Kinleigh, Folkard and Hayward xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Professional Services

ext month will see the Chancellor Rishi Sunak deliver his second official budget statement to the House of Commons. For most Chancellors this would be a big deal, but Mr Sunak has had more than his fair share of experience over the past 12 months. It has been a year packed with financial aid package announcements – he’s a dab hand. This doesn’t make it less momentous, however. In many ways, this budget is a taller order than most. There is little doubt that tens of billions more taxpayer pounds are destined for emergency business loans and the furlough scheme. The Bank of England is poised to move the base rate into negative territory if needed. Even as millions of people are given the vaccine, social distancing and lockdown measures look set to be in place for some months to come. More ‘unprecedented’ fiscal stimulus is needed, and desperately. Whether the housing market, which has seen a boost in the form of the temporary stamp duty holiday, is in for an extended period of fiscal support is the question on most of our industry’s lips at the moment. The relief increased the starting threshold of residential stamp duty from £125,000 to £500,000 from 8 July 2020 until 31 March 2021. There is no doubt that offering buyers a reprieve on their purchase costs has supported the housing market through an extremely difficult time. Since its introduction, seasonally adjusted data shows that in October 2020, transactions were 8% higher than October 2019. That compares to a fall in transactions of more than 50% during the first lockdown, when valuations ceased almost completely.

The number of people now calling for an extension to the stamp duty suspension is rising – indeed, a petition started by a private individual who began his purchase in October last year and fears he won’t complete in time to qualify for the holiday had reached more than 55,000 signatures at the start of January. Yet even at the start of January the Treasury continued to release statements reaffirming that it would not be extending the holiday, and insisting that the policy was only ever intended to provide a temporary boost. That’s as maybe, but the question here is not about whether the UK

“Underwriting amid massive employment uncertainty, an ongoing furlough scheme and volatile self-employed income situations is a very complex and timeconsuming business” needs long-term stamp duty reform (it does) or even a longer tax holiday. The argument up for debate is what the current dead stop at midnight on 31 March will do to both the economy and to individuals. Ending this relief without a tapered run-off at the end of March, as is currently planned, is likely to wreak havoc. The Building Societies Association (BSA), Intermediary Mortgage Lenders Association (IMLA) and Association of Mortgage Intermediaries (AMI) have all warned against such a cliff edge in fiscal policy, calling for flexibility from the Chancellor. This is particularly important for those buyers who are already in the process, with their affordability calculated based on completion without stamp duty costs. Tens of thousands of transactions are stuck in the system, held up by the limited number of valuers and conveyancers available to process

MORTGAGE INTRODUCER FEBRUARY 2021

applications fast enough. Large numbers of these transactions will collapse if buyers find themselves owing thousands of pounds in stamp duty when they had reckoned on completing before the 31 March. They will have no choice but to pull out. This not only hurts these individuals’ homeownership aspirations, it has an exponentially harmful effect on the entire housing market. Chains will break, even where borrowers can still afford to move and pay up to £15,000 more on their transaction if it completes on or after 1 April. This will compound processing problems in the market that are already backed up over months. Getting a property purchase from offer to completion requires the successful co-ordination of borrower, lender, broker, estate agent, seller, two sets of solicitors, valuer and underwriter. The pandemic sent many people home from the office yet again at the start of 2021, adding complications to processing and delays to correspondence. Social distancing continues to impede physical valuations. Underwriting amid massive employment uncertainty, an ongoing furlough scheme and volatile selfemployed income situations is a very complex and time-consuming business. For every buyer forced to pull out because their completion is pushed into April, another three or four transactions could collapse. All of that work goes back to square one, exacerbating the backlog even further, while at the same time delaying the actual economic value of that work and those transactions by yet another 16 weeks. Winding down the stamp duty holiday in a sensible manner, so that those transactions already in motion on the basis of completing before 1 April can complete on the same terms, must be the approach taken. Mr Sunak has shown impressive calm in the face of calamity already, now really is not the time to rock the boat. M I www.mortgageintroducer.com

REVIEW

MARKET

Multigenerational living Graeme Aitken business development manager, Harpenden Building Society

hatever your experiences have been during COVID-19, one aspect that has remained constant throughout is ‘change’. The way we live and how we finance our accommodation hasn’t escaped this constant evolution, and remains an ongoing point of debate for those of us working in the mortgage industry. Staying ahead of the curve and providing access to market-leading mortgage products and services remains important for brokers focused on growth and providing the best customer service. CHANGES IN DEMAND

What has been apparent to the Harpenden team during this pandemic is the increasing desire for individuals and families to find their ‘perfect’ place to live. People have had to spend more time at home, and are even more intent on finding the right property to accommodate changing needs, and the most appropriate and relevant mortgage to support this purchase. With high demand for property, it’s important for brokers to have a good range of mortgage options at their fingertips which will best suit their customers, whatever their requirement. One sector we’re seeing increased interest in is multigenerational living. According to research from Aviva, a third of UK households are now multigenerational, mainly due to adult children living with their parents. Older relatives account for 14% of multigenerational set-ups, with a quarter of ‘granny flats’ designed for grown-up children. LIVING WITH WIDER FAMILY

Multigenerational living has become popular for a number of reasons. www.mortgageintroducer.com

Children are returning from university unable to afford rising rental costs, young adults are opting to live with parents as their individual income won’t qualify for their own mortgage, older generations require family support without incurring care costs, and blended families are beginning new lives together, to name a few examples. The full list of variations is endless. What is apparent is that families are increasingly pooling their resources to create the best living space possible, and looking to secure a mortgage which can facilitate this complex situation. Jane Penrose from Hertfordshire explains her own situation: “Since the lockdown was introduced we became a family of seven. Our grown up children and their partners all joined forces with us and we created one large, extended family living at one address. It’s worked surprisingly well. We’ve combined resources, which has made finances stretch further, we can look out for one another more easily and we’ve felt more able to adapt to new situations brought about by the pandemic. “Although this solution was originally seen as a temporary measure, we have realised that this could become a permanent arrangement. We’re now thinking about buying a larger property together to allow this new way of living. It would mean we could support each other more effectively, it creates a lovely social environment without having to travel to visit family, and in the case of one of our children – a young teacher – it means he could make the first step onto the property ladder, something he couldn’t ordinarily afford on his sole income. “The opportunity to use our incomes more efficiently through a multigenerational mortgage, rather than financing two, three or four households in the future, is an appealing option and something we may not have considered without the pandemic.” SPECIALIST LENDER ADVANTAGE

In scenarios like this, the property being purchased is likely to comprise

either an annexe or an additional separate dwelling, appearing on the same property title. We are happy to consider these for mortgage security purposes. Specialist lenders like ourselves are more willing to accept this type of property, whereas in our experience more standard lenders often shy away when more than one dwelling appears on the same legal title. As one might expect, a multigenerational mortgage application comes with complexities. It’s important to partner with a lender that can more easily accommodate this and assess each named individual’s financial circumstances in detail to create the best outcome. We find our manual underwriting approach makes it easier to say yes, when an algorithm might not. APPLICATION TIPS

The following considerations will speed up the application for a multigenerational mortgage: 1. Affordability. With the incomes of up to four named individuals possible on a multigenerational mortgage application, it’s important to outline which verified incomes will be included and confirm that they will meet the multiple criteria. 2. If older persons are party to the purchase, will their age be a restriction to them obtaining a mortgage? 3. If either interest only or part interest only, part repayment is required, is there an acceptable repayment or exit strategy in place? 4. Do the applicants have suitable provisions or plans in place in the event of the death of any of the borrowers or owners during the mortgage term? 5. Will an annexe or separate living accommodation on the same title be acceptable as mortgage security? Specialist lenders, expert and experienced in providing mortgage options for multigenerational households, will be pleased to support brokers and their customers exploring this new and increasingly popular way of living. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

NETWORKS

Checking the checklist Shaun Almond managing director, HL Partnership

ith so many of us running our businesses or advising clients from home at the moment, I wanted to highlight the intermediary sector, and especially those advisers who are working alone. Working from a home office can be a lonely business at the best of times. In a lockdown, when house calls to customers and visits from business development managers (BDMs), compliance specialists and network staff are off the menu, the arrival of the postman or the Tesco delivery van takes on particular significance. The likelihood that the lockdown will now go on well into March is not going to help those finding it difficult to maintain a positive outlook. We may all be busy, especially with the end of the stamp duty holiday in sight, but money doesn’t necessarily compensate for endless hours in front of a laptop. Online meetings mean that we can maintain our businesses, but we are all missing the face-to-face interaction with our colleagues when we can all be in the same room. Apart from actually seeing customers, attending live events, seminars and expos and enjoying the

banter and the opportunity to stock up with pens, pads and stress balls – so useful at the moment! – the feeling of being cooped up with only the dog and, if lucky, significant others to talk to, can be challenging. I encourage all of us to keep talking, however tough that call may be. While it won’t suit everyone, there is also no substitute for physical exercise to provide a much-needed shot of adrenalin and mood-boosting endorphins. Apart from indoors exercise routines, the web is full of noequipment regimes, and we can still go outside to walk and run if we want to be ambitious. Not only that, but we can meet up, socially distanced of course, with another person not from our bubble. If you do venture outdoors, just beware of the cyclists and runners, usually imperfectly distanced and breathing hard as they go past. Just get out there, even in this weather – it really helps. Whichever way COVID-19 is affecting you and your family, colleagues and friends, the vaccine rollout does offer the potential for a return to normality. So, let us look forward to if not an end, a gradual adaptation and return to the ‘good old days’ – or something equivalent! BEING THE BEST WE CAN

It was only a few years ago that the argument for independent whole of market advice from a living,

Make every eﬀort to ensure you reinforce quality of service

MORTGAGE INTRODUCER

FEBRUARY 2021

breathing human being had been won convincingly. However, nothing lasts. The onward march of technology, married to customers’ desire for ‘everything now’ and the willingness of the regulator to reconsider loosening the rules around execution-only in response to lobbying from new webbased B2C providers, means we have to make every effort to ensure we reinforce the quality of service we offer to each and every customer. EXPENSIVE BUILDINGS INSURANCE BLIND SPOT

In the rush to complete property transactions before the end of the stamp duty holiday, it would be too easy to overlook the little things, without which a completion could be held up and lose its place in the queue, just as the deadline arrives. Have you arranged the buildings insurance to be in place, and has it been noted by the conveyancer liaising with your lender? As the end of the stamp duty holiday looms, a simple oversight in arranging buildings insurance could end up costing customers thousands of pounds if transactions are held up because the paperwork is not complete. Every adviser has a checklist in their head of what is required for a completion to take place, which in normal circumstances would ensure that nothing is missed. The stamp duty holiday cut off date at the end of March makes this a far from normal time, and something so simple as having buildings insurance in place could get lost in the rush to get cases completed. Although it is very simple to activate, leaving it until the last minute means that, with both conveyancers and lenders’ completions departments at full stretch, sending confirmation of a policy being on risk could be missed, with disastrous consequences. Tens of thousands of pounds of extra cost to customers could be avoided just by ensuring that buildings insurance is in place in time. M I www.mortgageintroducer.com

REVIEW

HIGH NET WORTH

Impacts on the 2021 property market Peter Izard business development manager, Investec Private Bank

here are a number of factors that property experts should be weighing up as we enter the year ahead. From the end of the stamp duty holiday and changes to Capital Gains Tax (CGT) rates, to the introduction of the 2% surcharge for overseas buyers, to the continued uncertainty posed by the pandemic, there is still much at play when considering the trajectory of the market. As buyers and investors make their plans for the year ahead, it’s crucial that intermediaries and advisers can offer an expert view on what might be coming down the line. TAX CHANGES

In July 2020 the UK government cut the standard rate of Stamp Duty Land Tax (SDLT) to zero on the first £500,000 paid on any UK residential property purchase. In place until 31 March 2021, the relief provides a potential SDLT saving of up to £15,000 per property. The move – designed to keep the property market buoyant at a time when economic confidence and activity were faltering due to the pandemic – was a success. More properties were sold across the UK in 2020 than 2019 – although, notably, this activity predominantly took place at the lower end of the market, where buyers were able to benefit from the greatest savings relative to prices. Research from Savills shows that, while 25% of buyers of property worth £250,000 to £500,000 were ‘significantly’ concerned about making a purchase before the end of the period, www.mortgageintroducer.com

the change in rates was a motivator for only 7% of buyers of homes worth more than £2m. For buyers in the prime London market, the potential changes to CGT rates – which could be introduced within the next year – may be of greater significance than the stamp duty holiday. The level of tax due on profits from buy-to-let (BTL) properties or second homes is speculated to increase from 28% to 40% for higher-rate tax payers, meaning that now could be a good time for them to reassess their property portfolios. SURCHARGE FOR OVERSEAS BUYERS

In the 2018 budget, it was announced that overseas buyers would have to pay a 2% surcharge on top of existing stamp duty tax rates when purchasing a residential property in the UK. This measure is due to come into effect on 1 April 2021. Overseas buyers are responsible for approximately 40% of sales in the UK

“Many experts point out that the UK has an enduring cultural appeal, meaning that London’s prime market shows signs of being able to bounce back” prime market and some have sought to purchase new homes ahead of the introduction of the levy. However, coronavirus travel restrictions have meant that some overseas buyers have not been able to visit the UK to find a property, and this has strongly impacted the London prime market. In an article published last year, the Financial Times reported that international buyers had been

“conspicuous by their absence in parts of Central London.” House prices in the capital’s most expensive neighbourhoods slipped 0.1% between June and November, capping the largest annual drop since 2016, according to Knight Frank. That said, many experts point out that the UK has an enduring cultural appeal, meaning that London’s prime market “shows signs of being able to bounce back,” according to Mansion Global. THE CONTINUING CRISIS

Lastly, and most significantly, much of the change to property taxation – and activity in the market – is being shaped by the coronavirus crisis. From an economic perspective, the government will at some point be required to recoup some of the cost to the Exchequer of the pandemic. This will include not only direct costs, but also the effect of lower economic activity and higher social security spending. The Office for Budget Responsibility (OBR) forecasts a budget deficit of £394bn in 2020-21. This is equivalent to 19% of gross domestic product (GDP), the highest level since 194445. This will mean that, certainly in the medium-term, high net worth individuals should prepare for possible changes to taxation. However, aside from economic implications of the crisis – and in spite of the UK’s latest national lockdown – it’s worth concluding by noting that the UK property market remains operational. In fact, in December 2020, even as new lockdown measures were introduced, viewings and instructions exceeded a five-year average, according to Knight Frank. Although experts caution that the third lockdown may lead to a second economic recession, it’s important to remember that there is reason for significant optimism in the form of the vaccine roll-out. If the government meets its targets, we will begin to see a turning point in economic confidence – and further good news for a property market which, against the odds, is remaining buoyant. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

RECRUITMENT

Successful careers and mentors Pete Gwilliam director, Virtus Search

our career goal is merely a wish until it’s written down, spoken of openly and you have commitment from your line manager to build a development plan, evaluating and measuring progression towards your goal as part of your annual appraisal. I’ve long advocated everyone should have their own career plan, and the benefit of taking ownership for making things happen in support of it. A lot of personalities benefit from having an added ‘consequence’ – by sharing your goals with people know you well, you create an accountability to that target that goes beyond selffulfilment. You have the added level of wanting to avoid your plan ‘falling away’ in front of others. A goal is a specific statement of what you want to achieve by a certain date, and is best reinforced when there are milestones throughout the year to keep you focused. Certainly, among those who have lost weight or reached sporting achievements, the evidence is that hitting targets is much more achievable if you monitor progress and record outcomes. Career-focused individuals should break progression down into defined milestones. The starting point is to honestly evaluate where you are, ideally with a 360-degree view of your skills and profile. Look at the role dynamics of what you are aspiring to. Identify the gaps between what you’re doing now and what would be required of you in that enhanced role. This enables you to be aware and to make plans to get exposure in similar responsibilities to the role to which you aspire. Many of us set goals without actually planning how we intend to reach them,

and this leads to an over-reliance on performance in your existing role. Whilst performance is clearly an indicator of your value, often the next step is going to challenge you to demonstrate new skills and an ability to step into new areas of responsibility. The benefit of finding a career mentor cannot be understated – someone who can help you achieve your professional goals, and give objective advice and support. Mentoring is definitely not reserved for the senior and well-connected professional. All you need is a vision of where you think you want to be in your career, the drive to get there, and the confidence to seek counsel from role models who inspire. This could take the shape of former or current colleagues, or from your other social and professional circles. Telling someone the ways in which they have inspired you and politely asking if they could spare some time for you to pick their brains is a request most will accept. As you articulate where you feel they could benefit your career progression, you are asking for them to go out of their way to help you. It is therefore imperative that there is a real

commitment from you to test yourself, and a level of gratitude and respect with which to establish and evolve this relationship. Of course, this means being punctual and well prepared, coming to meetings knowing what challenges you are facing, what it is you want to learn and how you think they could help you. It is also respectful to share the progress in practice. This keeps holding you accountable, but also allows you to relay positive feedback on how their advice helped achieve the progression. A career mentor must be someone you trust, so you can safely debate any obstacles that are standing in your way. There are situations that might be specific to gender, race or disability, which means diverse role models can make a big difference in enabling under-represented groups to feel – and actually be – less likely to be denied the same opportunities. So, ask yourself who in your life has overcome the obstacles that you are now facing. Or ask from who is the best at the skill you want to develop. So now you’ve taken the first steps towards enjoying the rewards that come from working with a mentor – what’s stopping you from reaching out? M I

The benefit of finding a career mentor cannot be understated

MORTGAGE INTRODUCER FEBRUARY 2021

www.mortgageintroducer.com

REVIEW

FIRST-TIME BUYERS

First-time buyer support is crucial Stuart Miller customer director, Newcastle Building Society

any industry colleagues are, quite rightly, highlighting the impact that any withdrawal of the stamp duty holiday could have on the market over the coming months. It will of course affect the affordability prospects of many first-time buyers, though ironically it has probably contributed further to climbing house prices over the period. Figures published by Halifax at the start of January suggest the average price of a house in the UK reached a record high of £253,374 in December, up 6% on 2019, driven largely by a surge in mortgage applications and approvals on the back of the temporary tax reprieve. The index also noted that the 0.2% rise in prices in December compared with November was the lowest rate of growth in the past six months of continuous gains. This suggests that buyers are already starting to lose momentum, partly because December usually sees a bit of a slowdown given the holidays, but also because the stamp duty holiday is set to end. There is reason for serious concern that without further support and innovative thinking, some first-time buyers could find it harder to get on the housing ladder, through a combination of house price growth, lack of high loan-to-value (LTV) mortgage options, and Help to Buy regional price caps not being reflective of house price increases during 2020. The government and wider industry need to come up with new ideas to support borrowers taking their first step to homeownership.

www.mortgageintroducer.com

The first-time buyer market contracted by 12% between July and December of last year when compared to the year before, as demand from second-steppers surged amid the stamp duty holiday. According to analysis from Reallymoving, those getting onto the property ladder still accounted for more than half the market in 2020, though the 51% share was a drop on the 56% segment first-time buyers made up in 2019. A large share of new homeowners also made use of government help, with 46% using the Help to Buy scheme to purchase their first property. It is not the only help available, of course; lifetime individual savings accounts (LISAs) are an underused but hugely tax-efficient means of building a deposit, but Help to Buy remains the stalwart of the market. Figures published by the government in November last year show that since the scheme’s launch on 1 April 2013, through to 30 June 2020, some 278,639 properties were bought through Help to Buy. It may not be all bad news for firsttime buyers. Bank of England data shows that UK consumers also cleared £600m worth of consumer credit in October, with £15.6bn of debt paid off since lockdown began in March. The £60bn lent in 2019 was a 28% increase on pre-financial crash levels, with buy-to-let, remortgage and home mover lending all shrinking over the same period, according to UK Finance. We are fooling ourselves if we think that by removing the pillars of support and not replacing them with alternatives first-time buyers will thrive. There is still a chronic shortage of the right kind of property, and we should not assume that first-time buyers will simply buy what is offered to them. Like other buyers, they are changing their priorities. In a survey commissioned by Share to Buy and

housing association Peabody, 64% of the potential first-time buyers who had registered an interest in alternative homeownership schemes such as Help to Buy or Shared Ownership stated that having a private garden has grown in importance to them since the start of the pandemic, and 61% said access to nearby open space was now more important to them. The pandemic has not deterred first-time buyers in their quest to get onto the property ladder, and 50% confirmed that they are keener to purchase than they were before.

“We are fooling ourselves if we think that by removing the pillars of support and not replacing them with alternatives first-time buyers will thrive. There is still a chronic shortage of the right kind of property, and we should not assume that firsttime buyers will simply buy what is offered to them” Clearly, further support is essential. We have already seen intergenerational lending – in the form of products like our own Joint Mortgage Sole Proprietor – play a significant part in helping families get on the housing ladder, but there is undoubtedly more that can be done. We have always been a big supporter of first-time buyers. A key part of our purpose is to help people own their home, so we are pleased to see that the Help to Buy scheme will continue – albeit in a slightly scaled back form. My belief is that ideas and support will need to go further. Government has shown its continued commitment to enabling first-time buyers to gain access to homeownership. In an ever-evolving market, the question remains: what can the rest of us do to help? As a building society founded on the principle of helping people buy their first homes, we plan to continue to do our bit through 2021 and beyond. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

PRODUCTS

Products and processes post-COVID Tim Hague managing partner, Sagis

or most of the past year, 2021 was the great white hope on the horizon. A vaccine was forthcoming, lockdowns would be over and life would begin its journey back to something more normal. Now it is here, a heavy dose of reality has hit. In spite of there being several vaccinations approved for use in the UK and the rollout already underway, lockdown and the social and economic consequences of it are going to be part of our lives for some time to come. The Chancellor will be mindful of this, and the continuing need for billions more in taxpayer money to be pumped into emergency funding schemes to keep businesses and individuals afloat. Whatever his plans are for the stamp duty holiday, furlough schemes and emergency business loans, lenders are going to have a very tough time over the coming year when it comes to assessing borrower affordability and lending responsibly. Already we are seeing stories in the media highlighting that difficulty – the couple whose remortgage and further advance was declined because of a late mobile phone payment of £24, for example. This is just one of many true stories that demonstrate the risk that has to be managed here. On the one hand, lenders have to be sure that they aren’t doling out debt to borrowers who cannot afford to repay it, or who face an uncertain income future because of the ongoing economic disruption caused by COVID-19. Lenders doing any reasonable volume of business also need to be able to think carefully about the thresholds and credit scoring standards that can be applied to their book across the board. But this approach is why the above scenario occurs – it’s

the ‘computer says no’ problem, even when anyone sensible would take one look and say yes. This kind of rigidity in underwriting is at once a help and a hindrance; it ensures consistency, but lacks the ability to take a considered view, something that is nearly always a better approach when it comes to assessing a borrower, but in today’s market is absolutely critical. There is a world of data out there, but how we choose to interpret it and the conclusions we draw are now of crucial importance. There’s also the massive elephant in the room, which is whether the stamp duty holiday will be wound down in an orderly fashion. If the Treasury adheres to the current plan of a cliff edge cut-off, it is going to cause massive headaches for borrowers whose transactions collapse, triggering other transactions in their chain to break. It’s also going to stir up a huge amount of distress and anger with mortgage lenders, which inevitably will have to withdraw offers if the affordability changes. This is yet another risk that lenders will be forced to manage and consider when it comes to approving or declining applications.

2021 has been the great hope on the horizon

MORTGAGE INTRODUCER FEBRUARY 2021

Stories of buyers whose dream was set to become a reality having that dream torn to pieces by the ‘big bad bank’? It’s only a matter of time before these begin to emerge. But there is one thing that all lenders will need to get a better grip on, and that’s product design. It is vital that this, and the processes needed to implement it, are fit for the market today and tomorrow. This is not just about an individual’s ability to keep up with their mobile phone payments when they’re receiving their salary month in, month out, but how you assess their creditworthiness when they have been furloughed three times in the past 12 months, made redundant and rehired by their employer in the same company but a different position, have kept up with their payments on credit cards, but have had to take the odd month’s holiday to tide them through the periods when administrative delays have impacted their cashflow. Lenders’ propositions need to evolve. A borrower who can manage the uncertainty and volatility of income seen by so many in the past year is probably a good credit prospect. However, basing a decision in principle on the traditional scorecard underwrite is going to kick many borrowers out before the lender has even had the chance to take a proper look. Lenders will need to think through product policies, as those that might once have fallen into the prime mainstream category suddenly become sub-prime. Experience shows that borrowers’ credit rehabilitation takes forever. Lenders need to rethink what prime looks like and carefully consider how they label their products. The first step in being a responsible lender in 2021 is to recalibrate how we consider affordability post-pandemic. We cannot rely on flogging the same old products to borrowers whose lives and finances have changed dramatically in a very short space of time. M I www.mortgageintroducer.com

REVIEW

EDUCATION

No such thing as a new normal John Somerville

head of regulatory relationships, corporate and professional learning, The London Institute of Banking & Finance

s the end of the stamp duty holiday approaches, it’s difficult to predict what might happen next in the property market. Lockdowns, new variants of the virus, more incentives for homebuyers – these are all possible, but nothing is certain. In the same way, consumer demand can change in surprising ways. Demand for more rural properties might end, as people who’ve left the big conurbations may start to miss city life – the wide choice of restaurants and the convenience of all-night shopping and streetlights, for example. CHANGING LIFESTYLES

Even if lockdown rules permit house viewings, unless the virus comes under control, many people will put off moving until they feel they can view properties safely. Lifestyles are likely to change, not just once but several times, and we don’t know how. There is no such thing as the new normal! The last few months have been intensely busy for the mortgage sector and everyone involved, but that could slow down very suddenly. So, when we’re planning our business strategies, we’d be wise to think a bit differently. The traditional model of finding new customers and contacting existing clients when their deals are about to end, may not be enough to get us through challenging times. As mortgage advisers, we have to be prepared for changes in consumer demand and behaviour, the stops and starts and the ups and downs. If house sales start dropping off, which may www.mortgageintroducer.com

happen when the stamp duty holiday ends, we should have other offerings in place to support our businesses. What we do know is that the pandemic is likely to be with us for a long time, and that the inevitable economic fallout will hit hard. Some economists are predicting that it will take at least 18 months for the UK economy to recover to pre-pandemic levels. If we look at the impact of that on customers, two things spring to mind: wealth and wellbeing.

“As mortgage advisers, we have to be prepared for changes in consumer demand and behaviour, the stops and starts and the ups and downs. If house sales start dropping off, which may happen when the stamp duty holiday ends, we should have other offerings in place to support our businesses” Clients’ incomes will be stretched, and many will also be in poorer health. Ours is a people-focused profession, and relationship management is key. If you’re not speaking to your customers at a time of need, they’ll go elsewhere and it will be a lot of work to get that business back. Now is a good time to think about what you can do to strengthen relationships with existing customers. Are you relying on getting in touch when their current deal is up? Or are you approaching them and offering to review their circumstances so that they have peace of mind? Some of your customers may have suffered a drop in income and be looking to remortgage. Interest rates are

much lower than they were a couple of years ago, so there are some good deals around. Conversely, a customer’s income may not be as reliable as it was when they took out their current mortgage. In lockdown there are also practical problems around validating customer documentation. That’s where the skilled mortgage adviser comes into their own. This is someone who can navigate the mortgage market and manage complex deals, who offers that personal touch by talking through a customer’s cashflow with them, helping them to plan ahead for the good times and the bad. Humans are emotional beings, and the pandemic has made all of us reassess our priorities. Those who waved a hand at the suggestion of critical illness cover or life cover when they initially took out their mortgage may want to rethink that now. They may be less confident about the future, the security of their job, their business or even their health. As a trusted professional, you can listen to their concerns and get a good measure of their circumstances and priorities. You can look at critical illness cover, life cover, making sure the customer has a will. You can explain their options and how needs can be combined and covered by one product – saving them from potentially expensive mistakes. In short, by giving your customers sound, ethical advice, you can make sure they put in place the right mix of income protection, critical illness and life cover. THE RIGHT OUTCOMES

You will be giving them peace of mind and helping them protect their families for years to come – and they won’t forget it. Getting the right outcomes for your customers will give you the edge. If you’re looking for a dedicated qualification to help you with protection advice, LIBF’s CertPro was developed specifically to support the mortgage sector. Nothing is predictable, but the skilled mortgage adviser, who can switch from drumming up business to reviewing their customer banks, is the one that will continue to be busy, no matter how unpredictable life becomes. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

SPOTLIGHT

KINLEIGH FINANCIAL SERVICES

inleigh Financial Services is part of the KFH Group, which includes estate agency, lettings, survey and valuation, build to rent, land and new homes, and block management services in its proposition. The group covers London and the South East, employs more than 800 people, and has been trading since the late 1970s. The mortgage broking and protection sales arm was initially established in the mid-80s, but in 2016 took a new direction by becoming directly authorised (DA). It is now run by Kelly Wicks and Malcolm Waldron and it provides advice for, among others, the group’s vendors, purchasers and remortgage clients, as well as its own substantial book of clients. What is it like being a mortgage advisor at Kinleigh Financial Services? Malcolm Waldron: From a purely practical point of view, our consultants currently cover 60 London-wide branches and support leading business divisions within the group, as well as manage our own broad client base which we have built up over the last 30 years. 50% of our consultants are based in head office as part of the central mortgage team in Wimbledon, but are expected to be out in the branch network as often as possible, and the other 50% are based permanently within our branch network. Our team also comprises two specialist protection advisers who are permanently based at head office and who also provide advice on life and critical illness cover, income protection and home insurance. This part of our business will grow over the coming couple of years, but the immediate focus is on the mortgage broking part of the business. Kelly Wicks: Our clientele largely reflects that of a mid-market London estate agency. They would be considered by most to be good earners, confident and affable people, but they are also demanding. They arrive with expectations that the group works hard to ensure are met and exceeded. Kinleigh Financial Services is part of that experience. We arrange all types of mortgages, including those for first time buyers, buy-to-let investors, let-to-buy mortgages and Help to Buy schemes. How does being part of a broader property group affect the role of advisors? KW: We have a phrase in the group that refers to our values: doing things the ‘Kinleigh way’. We recognise the importance of people and their relationships at all levels of business in the group, and how that can add real value. It’s a ‘sum of the parts’ view that means our service and results are greater than they might otherwise be as individual business units.

MORTGAGE INTRODUCER FEBRUARY 2021

Doing it ‘the MW: Our relationship with the branches is incredibly important. We are very alive to the fact that our consultants must have a good personality fit with the areas they manage. That’s not to say they will not do business outside that patch because some of our work is very much helping clients who may not be using our sales agency. However, it is our goal to make sure that our brokers are effectively an extension of our agency’s branch staff. They may be office-based three days a week, but a significant part of their role and success is that ability to become a respected face on their patch. At least two days per week is spent on site with those internal customers. We are acutely aware that the people we take on have to be able to fit with the people with whom they are working – our clients, of course, but also the branch directors and negotiators who trust us with their clients. KW: Relationships are very important for our success. We work very closely with the L&G Mortgage Club, which over the years has been very supportive of our change of strategy and new direction. Their relationship with lenders is really important – we have access to products, lenders and advice that otherwise might be difficult to obtain. They have been incredibly supportive and helpful as we transitioned to DA status. For our part, given our values and market focus, we make it our business to deliver excellent quality business, and lenders know we are a safe pair of hands. Our application to offer rates are exceptionally strong and our audit results are always above average, which is a huge reputational source of pride and commercially very important to us. How did becoming DA affect the business? KW: The decision to become directly authorised, while daunting at first, has afforded us the opportunity to build a business on our own terms. Over that period, we have dramatically reshaped our proposition. Our goal, in a broader context, is to support the success of the group, and our business has been developed so it can better support the sale and purchase business of the broader agency. Previously, our mortgage broking was very much focused on the market outside of the group. We have done a lot of work to address that imbalance, and it has proven hugely worthwhile – to the point now where our focus for growth is predominantly about www.mortgageintroducer.com

SPOTLIGHT

KINLEIGH FINANCIAL SERVICES

e Kinleigh Way’ growing our business from within the group. By way of example, since we became DA, we have grown the volume of business we do on behalf of the group exponentially – 80% of purchase enquiries are internal referrals. But there is more we can, and plan to, do. We are building from a good place and now have a much better balance.

MW: It’s a very exciting part of the market to be in at the moment. The changes and potential for London and the South East are huge. We need the resources to be able to cope with increasing demand from within the business and the demand from the market overall as we emerge from the pandemic. Time and again, London and its suburbs have proven resilient to all sorts of challenges, and the evidence to date is that this is will be no exception. As we grow our base of mortgage consultants, we will in due course be recruiting another specialist protection adviser to support them.

MW: For me, the change in status transformed the business to the point where we have totally changed our approach and many of our processes. At KFH we now look for experienced mortgage consultants who will thrive in the supportive environment we have built. Mortgage broking can be challenging, ask anyone working in the current environment, but it should always be rewarding, so we have focused on building an infrastructure that allows ambitious, self-sufficient mortgage consultants to have the opportunity to earn extremely well from the foundation of one of the best recognised brands in the London market. As well as understanding who the right people for us are, we have made important improvements in our process. Once upon a time we would have got involved with clients at the point of offer. Now, because of the trust we have built and earned to support the model we have developed within the group, we meet potential clients much earlier in the process. This helps all parties get the client what they really need and benefit from the kind of service and results we stand for.

KW: Yes, it really is a time to be preparing for more activity. Anyone interested in joining the KFH financial services team should contact our talent acquisition team either by email at recruitment@kfh.co.uk or by phone on 020 8739 2052. M I

What can you tell us about KFS’ short-term plans? KW: We have some ambitious plans for the coming year. By the end of 2021 we want to have almost doubled the number of mortgage brokers in the business. Our business volumes have been extraordinarily resilient over the past 12 months, and the property market, as everyone knows, has been hugely supported by the government’s stamp duty holiday. Whatever the shape of further support, we do not anticipate any let-up in our clients’ need for mortgage advice in our London markets. All of that is still happening notwithstanding the challenges of working from home in the midst of the pandemic. Indeed, some of the changes we have made to consultants’ working practices we anticipate keeping. Virtual meetings, for example, work very well for our clients and consultants. www.mortgageintroducer.com

Kelly Wicks

Malcolm Waldron

Technical director Kelly joined KFH in October 2003 and headed up the compliance and operations functions before taking on her current role incorporating sales, compliance and operational oversight. She previously worked at Winterthur Life UK, where she was responsible for the management and oversight of the firm’s vetting and authorisations team before becoming HR Manager for Winterthur Life, MG1.

Central mortgage services director Malcolm has enjoyed successful sales roles throughout his entire career. In 1987 he was the first mortgage advisor to join KFH, and since then has worked as sales manager for Kinleigh Financial Management and territory sales manager for the South East, before becoming sales director for the South East and now central mortgage services director.

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

BUY-TO-LET

Opportunities for tuned-in brokers Ying Tan founder and chief executive, Dynamo

he beginning of 2021 has proven tough for many people. From a business perspective, it has been a whirlwind of activity. This has kept us busy, and there are certainly no complaints on that front. In many ways, the mortgage market has been extremely fortunate over the past year. The first lockdown obviously hurt, but the subsequent second and third lockdowns allowed us to function and, in many areas, prosper. I held back from saying ‘function normally’ there, as we are still dealing with a world which is, hopefully, far from normal. People and businesses have evolved and coped in many different ways over this period and the buy-to-let (BTL) marketplace is no different, especially when it comes to limited company lending, as this has become an increasingly attractive proposition for a wider range of landlords and lenders. LIMITED COMPANY BTL

Research by Hamptons shows that there were a record number of new limited companies set up to hold buyto-let properties in 2020. Last year there were a total of 41,700 buy-to-let incorporations, an increase of 23% on 2019. The numbers have more than doubled (128%) since 2016 when tax changes for landlords were introduced. In that year, a 3% investor stamp duty surcharge came into force, and the proportion of tax-deductible mortgage interest on buy-to-lets held in personal names began to be phased out. This accelerated the shift towards limited companies. Between the beginning

of 2016 and the end of 2020, more companies were set up to hold buy-tolet properties than in the preceding 50 years combined. At the end of 2020 there were a total of 228,743 buy-to-let companies up and running, an all-time record.

“Limited company lending is certainly an area which will generate plenty of opportunities for intermediaries” The research also found that southern-based landlords have been most likely to incorporate, thanks to the benefits of incorporating a buy-to-let portfolio into a company being larger in this area. More than a third (34%) of all companies set up to hold buy-to-let properties in 2020 were in London. Together, London and the South East accounted for almost half (47%) of all incorporations. This news follows the rate of rental growth accelerating sharply in December 2020. RENTAL GROWTH

Annual rental growth rose from 1.4% in October to 3.0% in November, and to 4.1% in December. This was said to be the fastest rate of rental growth recorded since July 2016. All nine regions in England saw rents rise during December, with rental growth also turning positive in Wales. Rents in London began to rise in November for the first time since the start of the pandemic, following eight months of falls. December saw growth jump from 0.3% to 1.6% in the capital. This rental growth has been fuelled by the formation of more new households and occupants continuing to opt for the shorter-term financial commitment offered by renting, over

MORTGAGE INTRODUCER FEBRUARY 2021

the cost and longer-term commitment that comes with property ownership. YIELDS

Focusing our attention on yields, the latest Buy-to-Let Rental Barometer by Fleet Mortgages revealed that rental yields on residential BTL properties in England were recorded at 5.7% in Q4 2020, a 0.3% drop from the 6% achieved in the same quarter in 2019, and a 0.7% quarterly decline. For the second quarter running, the North East posted the top rental yield regional figure of 7.9%; however, this was down 1.5% on the year previously and down on the 8.8% yield posted in Q3 2020. Only two regions of England posted positive rental yields over the period, the East Midlands and the South West. Fleet said the overall data showed a relatively stable picture. However, the fact remains that increases in property prices in many regions of the country had impacted on the rental yields being achieved. A typical portfolio landlord had eight properties in their portfolio in Q4 2020, generating an average rental yield of 5.7%. The data also suggested that portfolio landlords were more inclined to purchase property during the fourth quarter of last year, compared to the same quarter in 2019. In the previous year, 25% of portfolio landlords purchased, but this increased to 38% last year. The increase in purchasing is likely due to the Stamp Duty Land Tax (SDLT) reductions, which have been applied until March 2021. Coming full circle back to limited company lending, there was a rise in property purchases via limited companies. In Q4 of 2019, half of all purchases by portfolio landlords were through a limited company; this saw an increase to 67% in the same period in 2020. I wholeheartedly agree with the sentiment from Fleet that the outlook for the private rental sector remains wholly positive. Limited company lending is certainly an area which will generate plenty of opportunities for intermediaries who are fully tuned into this important – and growing – area of the BTL marketplace in 2021. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

HMO customers and Article 4 Adrian Moloney sales director, OneSavings Bank Group

ou’d have to have been living under a rock for the past few years not to be aware of the huge increase in popularity of houses in multiple occupation (HMOs). The rise of HMOs has been a key feature of the housing market in the last decade or so, with landlords increasingly interested by the potential to earn higher rental yields. According to the latest research by BVA BDRC, HMOs generate significantly higher average rental yields compared to other property types, at 7% – more than a percentage point higher than the overall average rental yield of 5.8%. As well as a higher return, HMOs are able to provide landlords with the peace of mind of knowing that, due to separate tenancy agreements, voids are spread and only affect a proportion of the income, reducing the risk of shortfalls and falling behind with mortgage payments. This can be particularly tempting if they are currently renting out single let accommodation and worrying about void periods. The growth in small HMOs – accommodating between three and six people who are not from one household – increased following a change in the rules in 2010, allowing homeowners to make certain changes to properties under permitted development rights (PDRs). Suddenly, homeowners could use PDRs to convert a C3 dwelling house to a C4 HMO property, without the need for planning consent. At the same time, however, the government also introduced Article 4 directives to encourage the retention of high-quality architectural features, and to preserve and enhance the character and appearance of locally built heritage. These directives also give

www.mortgageintroducer.com

local authorities the power to remove permission for change of use from a C3 to a C4. As HMOs have gained in popularity, there has been a corresponding increase in local authorities introducing measures to control the number of properties being converted. In recent months, councils in Liverpool, Brighton and Bath and North East Somerset have all taken steps to limit the number of HMOs in the local area. So, what can brokers do to ensure their customers don’t fall foul of Article 4 directives? To start with, before your customers commit to purchasing and converting a property into an HMO, you should always encourage them to check for any Article 4 directives with the relevant local authority. The directives aren’t applied unilaterally, so landlords should always check the situation in the area they are buying the property. To find out further information, your customers should also seek the advice of their local planning officer before pressing ahead with their development plans. They should check if they need planning permission first, as the financial implications further down the line could be huge.

Article 4 directives often go handin-hand with mandatory, selective and additional licensing, and although these are usually departments within the same authority, they often work independently of each other, so your customers should always check with them individually. Fortunately, specialist lenders like Kent Reliance for Intermediaries are here to help you navigate your way through this potentially confusing landscape. We accept HMO applications from first-time landlords, provided they’re a residential homeowner and the HMO property is no more than six bedrooms. Our common-sense approach to lending and experienced team of business development managers means you’ll receive all the HMO support you need to help you keep your customers fully informed. With landlords constantly looking for new ways to diversify and boost their rental yields, HMOs could offer them a way to achieve a return that can’t be achieved with a traditional buy-to-let. By making sure they’re aware of the potential pitfalls of Article 4 directives before they take the plunge, you’ll be giving them a good chance of achieving their investment goals. M I

Awareness of Article 4 directives is essential when considering HMOs

FEBRUARY 2021

MORTGAGE INTRODUCER

REVIEW

BUY-TO-LET

Why are you here? Bob Young chief executive officer, Fleet Mortgages

t the end of any year, like many of you I take a bit of time to look back and wonder what I could have done differently, what has worked, what hasn’t, and to plant some seeds in terms of changing things and taking the positives out of what has occurred. As humans, we can sometimes gloss over certain aspects of our lives, working and professional, depending on whether we see the glass half full or empty. Difficult periods can be forgotten if for the former, while successes can also be glossed over for the latter. Personally, I’m chuffed that I have a glass. Such an exercise undoubtedly helps you in the future, specifically from a business point of view, regardless of how big your business is or what role you have. For instance, Fleet Mortgages is a relatively simple, small business, but if you take out what we actually do for a minute, I have believed for a long time that successful firms work towards the same thing. To quote Robert Townsend, the chairman of Avis back in the 1970s: “If you’re not in business for profit or fun, why are you here?” Let’s take the latter point first. Are we enjoying what we do? Let’s be honest, pandemics do not lend themselves to fun. But while fun might be in short supply, there are things we can find in our work that we enjoy. Enjoyment does need to be present somewhere along the line, even if it’s just in small ways. Remote work has highlighted the need for social interaction, and businesses are looking at creative ways to instill fun into the environment, be it a company quiz or a gift box.

Enjoyment might also come from the relationships you have with your team, those that support you, other colleagues, your peer group, or even those you interact with online, who might allow you to share the burden and provide advice and counsel. A friend of mine who has worked as a sole trader for over a decade recently set up a business with three like-minded individuals. He told me that, until then, he hadn’t quite realised how much he had missed that level of interaction, shared experience, and the benefits of being able to bounce ideas off each other, and yes, the fun. A COMMON GOAL

Now, of course, there is absolutely nothing wrong with being a one-person band – the mortgage industry relies on many such businesses. But there’s also plenty to be gained from linking up with others, sharing ideas or resources, and potentially working towards a common goal. My friend also said that working on a new project had not only given him a boost, but had also re-energised him across his other business interests. All this, of course, during a pandemic when the opportunity to physically meet up just hasn’t been there. Like others, the new business in question has been developed via lots of online Zoom meetings. So, take the opportunity to engage with others, even if – at the moment – it has to be purely online. PROFITABLE PURSUITS

Secondly, we come to the next part of Townsend’s quote: profit. I’ll never quite understand the negative attitude of some towards discussing making money. Like the vast majority of businesses, Fleet Mortgages needs to make a profit to succeed, and I’ve never felt that anyone in business – adviser, lender or distributor – should be apologetic for acknowledging this. At Fleet we don’t have ‘sugar daddy’ investors throwing money at us; we stand or fall on whether we impress

MORTGAGE INTRODUCER FEBRUARY 2021

you enough for you to give us your cases and then ‘fulfil’ them, getting the offer and completion through as quickly and effortlessly for you as we can. It’s why we obsess over 24-hour turnaround times, regardless of what our competition are doing. Last year I was up for an award, and during that process I was asked by a major broker – who knows me well – whether Fleet was going to make a profit again in 2020. I said I thought so, but that it would take a lot of effort and possibly some tough decisions. Now, I didn’t win the award, but far better than that was the fact Fleet did make a very healthy profit last year. In fact, since we started nearly seven years ago, the only year we didn’t turn a profit was in our very first year of operation – no mean feat in my world, let alone considering the year we have had recently. That profit is absolutely crucial – it allows us to continue lending and working with advisers, keeps very good people in their jobs, means we can plan growth for the future, pay taxes, and show the value and quality of our proposition, which hopefully brings more interest in, and so on. In a nutshell, profit drives every business – the good ones survive, and those that can’t make a profit eventually fold. When you understand profitability does all this and more, there’s no reason to be shy of securing it. So, what’s the point of this article? Well mainly to salute all of you in distribution who – like us – know that ‘turnover is vanity and profit is sanity’. To recognise those who get a lot of enjoyment and pleasure in looking after their clients – as we at Fleet get looking after you – who perhaps don’t always win the awards, but always make a healthy profit which helps you, your staff and their families. Keep doing what you’re doing, and try to have fun along the way. I’ve no idea how 2021 will end, but wherever the market takes us I hope you have a very prosperous year. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Landlord expansion is good news George Gee commercial director, Foundation Home Loans

n these times, it’s understandable that we want to look for the positives, particularly in our professional lives, and specifically when it comes to the ongoing demand for our services and the products we’re able to access on behalf of clients. There was a significant focus in 2020 on the residential mortgage space, not least because of the pent-up demand that was unleashed after lockdown, and how this was accelerated by the government decision to provide the stamp duty holiday. Of course, it wasn’t just owneroccupiers who were eligible for the stamp duty holiday; in England, Scotland and Northern Ireland, landlords too were able to access it, albeit still having to pay the extra surcharge that comes with the purchase of an additional property. With under two months left until the holiday comes to an end, one might surmise that the vast majority of landlords who are going to purchase are already in the system. This may naturally lead to some debate about ongoing activity in the buy-to-let sector post-31 March, through the rest of the year and beyond. Should there be an element of concern that a cliff-edge drop will be the outcome for buy-to-let purchases? Will all of those who were going to have purchased in the months ahead already have brought that transaction forward? Will we see a drop in buy-tolet lending because of that? It’s very early into the year, but our own activity so far, and the results of the recent BVA BCRC landlord research, appear to provide plenty www.mortgageintroducer.com

of evidence to suggest that landlord borrowers are not going to be put off adding to their portfolios, even when that stamp duty incentive has been taken away, and the 2021 buy-to-let market will remain strong. To start with, a number of landlords have clearly not purchased in the last six months because they were put off by increasing valuations. Prices may well stabilise, and even drop in some areas, which could give landlords an opportunity to buy at lower levels than was possible during the stamp duty holiday.

“Landlord sentiment remains increasingly positive, and many will not be put off from adding to their portfolios” The BVA BDRC research of 846 landlords – which took place between December and January – not only provides evidence of an increasing confidence amongst this borrower group, but a greater willingness to purchase, potentially remortgaging in order to fund this, and the greater likelihood they will use limited company vehicles. Firstly, confidence undoubtedly grew as 2020 went on, and while this survey was completed before the third lockdown began, landlords do appear to have grown more optimistic the further they move away from the first lockdown hit. Four out of five ‘optimism indicators’ based on landlords’ outlooks over the next three months increased between Q4 2019 and Q4 2020 – namely their thoughts on capital gains, rental yields, the UK private rental sector, and their own lettings business. There was only less optimism about the UK financial sector between the two iterations of the survey.

Overall, landlord confidence rose, with a lot of that predicated on the increasing demand they have seen from tenants. A third (32%) of landlords had witnessed tenant demand increase in the previous three months, the biggest proportion in nearly five years, and this has led some to look at the expansion of their existing portfolios. Meanwhile, 16% intend to purchase more properties in the next 12 months – up from 15% in Q3. While 20% said they would decrease the number of properties they own over the same period, that figure dropped from 25% in Q3. Landlords in the North West, Wales, West Midlands and Central London were the most likely to add to their portfolios, and of those 16% who intend to buy, the average number of properties they intend to buy is just over two. Advisers active in the buy-to-let sector will perhaps be unsurprised to learn that 51% of landlords surveyed said they would buy via a limited company, with this number jumping to 56% among those who own more than 11 properties. While almost three in 10 (27%) landlords plan to remortgage over the next 12 months, this grows to 36% of portfolio landlords. It all goes to show that landlord sentiment remains increasingly positive, and that even with the stamp duty holiday due to end on 31 March, many landlord borrowers will not be put off from adding to their portfolios, and using a buy-to-let mortgage to do so. Indeed, 70% said they will use a mortgage, while advisers will also have a strong opportunity with those landlords looking to refinance and utilise their equity in order to grow their portfolios further. It is impossible to predict the future, and we can’t yet know how this latest lockdown might change landlords’ plans, but at the moment it seems they will continue to seek expansion. That is good news for advisers, and Foundation Home Loans will be on hand to support you in helping those landlord clients with their next steps, whatever they might be. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

BUY-TO-LET

Buy-to-let is ageless Jane Simpson managing director, TBMC

he size of the buy-to-let mortgage sector has been pretty stable over the last couple of years, staying at around £36bn. However, the Intermediary Lenders Association (IMLA) is forecasting an optimistic £283bn for the total amount of mortgage lending in 2021, and some industry pundits are predicting growth in the buy-to-let sector, perhaps beyond £40bn. There are certainly reasons to support the continued viability of buy-to-let property as an attractive investment strategy, particularly in the current economic environment. With interest rates at near-zero and the unpredictability of the stock market, the yields associated with tanglible bricks and mortar are a serious contender. The buy-to-let mortgage sector may also see new interest among larger mainstream lenders, looking to widen their propositions with products that provide a good margin. Specialist lenders might therefore experience some additional competition for market share. All of this ultimately bodes well for landlords, as lenders are demonstrating an appetite for business, providing an increasing number of products to choose from and widening their criteria options to suit most buy-to-let mortgage requirements. Buy-to-let finance has never been a one-size-fits-all product. Some lenders focus primarily on ‘vanilla’ cases, whilst others – such a Paragon Mortgages, Zephyr Homeloans or Foundation Home Loans – have a more specialist proposition. This means that landlords from an ever-widening demographic make up the population of property investors in the UK.

Age is certainly no barrier to residential property investment. For older landlords, those approaching retirement age or beyond, there is a wide range of lenders and products to choose from, catering for most finance needs. There are providers with a maximum age at application of 75, 80 or 90, and some with no maximum age requirement at all. Buy-to-let property may also become more popular among the younger demographic. Most buy-to-let lenders have a minimum age of 18 or 21, providing that other lending criteria is met. Career expectations for young adults have changed considerably in recent years, and the pandemic has inspired many to set up their own business ventures during lockdown. A recent poll for ISP GoDaddy showed that one in 10 people in the 16 to 24 age bracket had set up their own businesses during the last year, and one in five have developed concrete plans to start up a new venture. With such entrepreneurial spirit being demonstrated by the younger generation, could buy-to-let be an attractive option for those aspiring

to have a self-employed lifestyle? Being able to work from anywhere, travel and set your own work schedule is a potential perk of being a landlord, although it does take time and commitment to build up a property portfolio that provides a suitable enough income to become a professional landlord. For people looking for an alternative to pensions, buy-to-let property is a worthy consideration for medium to long-term investment at any age. Buy-to-let property is also a leveraged investment, with lenders typically offering 75% loan-to-value (LTV) on their product ranges, which is another reason for its popularity. During the past 12 months, with household spending curtailed, there has been an opportunity for some to save up significant sums, which could provide the deposit for a first buy-to-let property, or a portfolio expansion for those already in the market. There is certainly plenty of opportunity in the buy-to-let sector, and for those intermediaries providing finance solutions to landlords, there is reason to be optimistic about business this year. M I

Most buy-to-let lenders have a minimum age of 18 or 21

MORTGAGE INTRODUCER FEBRUARY 2021

www.mortgageintroducer.com

REVIEW

BUY-TO-LET

The impact of Brexit on the PRS Richard Rowntree managing director of mortgages, Paragon

efore Brexit was ousted by COVID-19 as the main news item, it dominated our headlines for a number of years. Finally, we now have a clearer picture of our future relationship with our continental neighbours. Despite an air of uncertainty still surrounding the impact of on the wider economy, I feel the influence of Brexit on the private rented sector (PRS) has largely been felt. There are a number of factors to consider with regards to Brexit and the PRS, immigration being a key topic. PRS AND IMMIGRATION

Immigration was a divisive subject in the Brexit debate. The PRS has long been a home to immigrants from all over the world, either on a short-term basis for seasonal work or for longer as people make a permanent home here. Net migration from EU nationals more than doubled between 2010 and 2016, and many of those moving from Europe to the UK lived in the PRS. Clearly since the result of the June 2016 referendum was announced, there have been questions about how it would affect the number of foreign nationals who migrate here. Many would have predicted a reduction in overall net migration as a result of the vote, but quite the opposite has happened. In the year ending March 2020, 313,000 more people moved to the UK than left. This is nearly double the 166,000 recorded for the year ending June 2016. What we have seen is a shift in the composition of that number, with a steep decline in long-term EU www.mortgageintroducer.com

migration. Since the Brexit vote, EU net migration has fallen from 189,000 in the year to the end of Q2 2016, to just 58,000 according to the most recent figures. Non-EU nationals have more than filled the gap, with students coming from all over the world to study at our world class universities driving this growth. Landlords have been responding accordingly, switching focus to these new markets. I would expect to see a further decline in the number of EU nationals coming to the UK to live, but a softening of the rate of decline. A new points-based system, with salary and language requirements, will change the way UK firms hire from the EU, possibly acting as a further brake. As numbers have declined over the past four years, pockets of the PRS have already felt the impact of the decline in EU nationals – areas that rely on seasonal work, for example. Nevertheless, landlords in these sectors have largely adapted to the changes over the period, and pivoted their properties to other markets.

The PRS is changing in subtle ways

Alternatively, they may have already sold their properties, as tenant demand has dried up. On a practical level, landlords will be looking for more certainty about their obligations around right to rent checks and letting property to EU nationals. Until 30 June, right to rent checks will continue in the same way as they do now for EU citizens, but the longerterm picture is less clear. Landlords will be seeking clarification from the government on this issue. CHANGING MARKET

With regards to tenant demand more broadly, I see other macro issues having a greater impact than Brexit. Coronavirus still dominates, and is creating record levels of tenant demand as people continue to reassess how and where they want to live. Where the PRS could still see the effect of Brexit is in specific industries being negatively impacted. The automotive industry, for example, relies heavily on exporting to the EU. Even in a tariff-free environment, automakers may look to relocate manufacturing bases to the continent. The loss of major employers will clearly have an impact on local rental markets, but the impact overall on the UK PRS has largely been absorbed. House prices are also an area of interest for landlords. Again, I feel the impact caused by Brexit will be negated by broader macro trends and the government’s fiscal policy. Brexit is just another element to consider in an already extremely complex market. A further extension of stamp duty, for example, will continue to light a fire under the housing market and sustain price growth. Conversely, the removal of the holiday, plus the unwinding of the various other government support schemes that have been in place, will invariably lead to a softening of prices. The impact of Brexit could be found in very specific local markets – again, where a major employer relocates – but there are broader issues at play that might influence house prices and tenant demand. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

PROTECTION

Choosing the right protection portal Kevin Carr chief executive, Protection Review; MD, Carr Consulting & Communications; co-chair, Income Protection Task Force

range of protection portals and online application processes are available to advisers these days, and their benefits can vary greatly. Some provide the option for the adviser – or insurer – to go through the underwriting questions. Some provide a link for the customer to complete the questions themselves. Some say the underwriting information must be collated and keyed by the adviser, with tele-underwriting only used if further information is needed. Some say the adviser should start the application, then as soon as they reach the medical questions there is a button to delegate the underwriting to the client, after which it goes back to the adviser. Some offer a full teleunderwriting service where the client provides all their medical information to a nurse. Last but not least, some offer the option of either a telephone interview with an expert third party, or an online medical and lifestyle questionnaire completed by the adviser on behalf of the client. “There’s no uniformity in the client journey across insurers,” says Peter Chadborn at Plan Money. “Financial planners typically aren’t medical experts, so it’s preferable to remove the adviser from the underwriting aspect. “Also, you often get better disclosure if the client is inputting the data themselves or speaking to a stranger. It can often be the case that the adviser is a family friend, which can make some discussions difficult. Advisers generally want to embrace tele-underwriting, but insurers all do it differently.”

While some portals don’t always have every product provider, there are still big advantages for any advisers looking to de-risk or streamline the end-to-end protection process. Amongst many other benefits: The Exchange from Iress is an online quote and apply portal for advisers; iPipeline’s SolutionBuilder automatically passes client information into extranets to pre-populate them and reduce underwriting with a fully digital end-to-end process; LifeQuote from Direct Life provides a protection portal and a full administration service for the adviser; The Protection Platform from UnderwriteMe has one application form, producing fully underwritten premiums from multiple insurers; Webline by Synaptic Software provides an easy to use whole of market quote and apply service. M I

Portals can expand an adviser’s horizons

MORTGAGE INTRODUCER FEBRUARY 2021

NEWS IN BRIEF Royal London has launched a new ‘underwrite later’ option for life cover on its business protection and relevant life plans, which will allow cover to be offered while underwriting takes place. OPAL IS has integrated UnderwritingPal, a new underwriting engine from RGAX, into its end-to-end protection platform in the UK and Ireland. MetLife has launched a new simplified income protection policy that covers some or all mortgage payments – up to a maximum of £1,500 per month – for up to 12 or 24 months.

We need to talk about case studies

uman stories make a big difference. A real-life person telling their story can be infinitely more powerful than a lender, insurance company or even an adviser. This is especially true for protection, which is perceived as dull or complex, if not both, and where stories need ‘bringing to life’ with a human touch, to quote many a dozen journalists. So why, collectively, do we seem to do so little to find and promote them? The barriers to doing this can include the perceived awkwardness of asking the client, a lack of understanding of the process, a possible distrust of the media, and maybe concerns around General Data Protection Regulations (GDPR), too. I’ve probably spoken to at least a thousand potential case studies over the years, and placed more than a hundred, and would agree it’s far from easy – and probably getting harder. But even when there are brilliant ones in the press, typically paid claims, I see very little attention or promotion of them across social media and marketing channels. Case studies are arguably the best marketing the industry has – let’s make the most of them. M I www.mortgageintroducer.com

REVIEW

PROTECTION

Tap into protection opportunities Mike Allison head of protection, Paradigm Mortgage Services

epending on who you listen to, the momentum that has built in the property market is either continuing to roll on or is slightly waning. For those writing protection, any slight drop in mortgage activity allows for time to focus on protection; indeed, many advisers will have clients whose protection will need reviewing given the frenetic mortgage activity since mid-2020. However, for those who are looking to ride the wave of consumer interest in protection, of which there is little doubt, then a good look into your own database may give you the opportunity. For example, anyone with clients who control a small to medium enterprise (SME) may find they welcome your advice on protecting their business as opposed to their family, and there is good news for many SMEs. These businesses have navigated the pandemic with greater ease than their larger corporate peers, according to a study by Harvey Nash and KPMG. Based on a poll of more than 4,200 leaders across the globe, the 2020 CIO survey states that SMEs were better prepared for remote working, have been less distracted by cyberattacks and haven’t been as affected by skill shortages as large corporations. This has placed them in a strong position for entering 2021. More than four in 10 (41%) SMEs said all of their key workers could work remotely even before the pandemic, something none of the larger corporations could lay claim to. For more than two-thirds (70%) of SMEs,

www.mortgageintroducer.com

75% of their key workers could operate remotely in an efficient manner, compared to just 40% among large corporations. Furthermore, smaller firms weren’t as affected by skills shortages as corporations, with almost a third (28%) fewer UK SMEs reporting this as a roadblock to innovation. Bev White, chief executive of Harvey Nash Group, commented: “COVID-19 has posed significant challenges to whole swathes of businesses, both large and small. “But the picture we now see emerging is that nimble SMEs are

“Many employers still do not provide income protection for employees in the event of them being absent from sickness, and with the crisis fresh in many memories, it can be an inexpensive way of delivering a benefit package” in many ways better positioned for recovery and growth than their larger counterparts.” Evidence from the report suggested that this also extended to their ability to attract talent. In the past, employer brands were often strongly tied with physical assets, like impressive head offices and fantastic facilities. COVID-19 has appeared to remove the pre-eminence of such things, and has created a more level playing field for organisations of all sizes. So, how might you help your SME mortgage clients? If any of them have bought into the value of individual protection for the benefit of their families, then extending that for the benefit of the business should not be too difficult to do.

Thriving businesses have much in common – for example, they are capital hungry, requiring financial support from banks. They also often need to recruit new employees – another expense – and when they do, they need to offer benefits packages, especially in industries where recruitment is difficult due to skill shortages. They also normally require the hard work of one or two key employees to keep the plates spinning within the business in often multiple roles. Protection can help cover increased loans in the event of death or critical illness, and key man income protection can provide valuable support to the business should the key personnel be absent from work. This could help fund a temporary replacement, either in providing wages or helping to fund ever higher recruitment costs for key personnel in specialist sectors. As far as recruiting is concerned, more often than not discerning employees are demanding benefit packages alongside salaries. What COVID-19 has shown is that being off work is tough financially. Furlough was indeed a godsend for huge numbers of employees and businesses. Many employers still do not provide income protection for employees in the event of them being absent from sickness, and with the crisis fresh in many people’s memories, it can be an inexpensive way of delivering a benefit package to them. This is even more important when the policies include a host of valueadded benefits to employees and their families, such as 24-hour GP access and stress counselling – two of the most used services during 2020. Paradigm saw a further increase in group risk sales by SMEs in 2020 from advisers who had never previously offered it to clients, with the help of UNUM – a key group provider – delivered a host of training and support to instigate this. If the SME market continues to flourish in 2021, then it remains a great opportunity to cover business clients who already see the value of personal protection. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

PROTECTION

Prepare for the less glamourous Andy Philo director of strategic partnerships, Vitality

year into the global pandemic, people continue to look at the property market as a reference for trends. Despite a seven-week shutdown last year, the housing market hasn’t shown any signs of slowing down. The Land Registry reported that house prices hit a high each month from August to December, and when the stamp duty holiday was announced, Rightmove had its busiest day ever for site traffic. The pandemic has caused people to think about how they want to live our lives. As buyers look to get their purchases over the line, they will also be prompted to look at the less

glamourous purchase that goes handin-hand: life insurance. Whilst not exciting, life insurance is there to ensure an already difficult time isn’t made worse by financial stress. There are important decisions to make when it comes to taking out life insurance, such as choosing between whole of life or term cover and single or joint cover. While whole of life guarantees a payout when the policyholder dies, term is often preferred, as it is cheaper and can be put in place alongside the duration of a mortgage – it pays out a one-off lump sum if the policyholder dies during the term. As the name suggests, single life insurance covers one person under one plan. If one person’s salary pays for the mortgage, it makes sense to cover the mortgage if they were to die. but if it is paid for with two salaries, this requires a different approach.

Many couples buying together will look at joint life insurance, which covers two lives and is generally cheaper than two single policies. It’s important to note that the cover usually operates on a ‘first death’ basis, which means that when the policy pays out, the cover ends for the other person. Two individual policies are a perfectly acceptable alternative. Another point to consider is that not all marriages and relationships last the course of a mortgage. What happens if the relationship ends? While some policies now offer a separation option, meaning they can be split and continue without either policyholder having to go through underwriting, for the majority of policies that is not the case. Purchasing a new house is no doubt an exciting time – a new beginning. It is essential at this time to prepare for the less glamourous part – a financially uncomplicated end! M I

F R I DAY 8 O C TO B E R

2021 EDI NBURGH

CONTACT A MEMBER OF THE TEAM TODAY TO FIND OUT MORE MATT BOND S P E A K TO07525 A M E456 M B E869 R O F T H E T E A M TO S E C U R E matt@mortgageintroducer.com

YO U R P L AC E TO DAY !

TOLU AKINNUGBA 07930 343 423 tolu@mortgageintroducer.com JORDAN ASHFORD 07539 529 739 jordan@mortgageintroducer.com

A N D W I T H S P EC I A L T H A N K S TO O U R P L AT I N U M S P O N S O R

REVIEW

PROTECTION

Make protection a part of refinancing Jeff Woods campaigns and propositions director, Sesame Bankhall Group

efinancing, whether through a remortgage or product transfer, is likely to make up a significant proportion of business for mortgage brokers this year. Indeed, some estimate that this figure could be as high as two-thirds. My only concern is: where does that leave protection conversations? The reality is that most people will not have reviewed their protection cover or needs for at least two years – that is, since their last mortgage deal was arranged. What’s significant is that this was before the coronavirus pandemic. This means that there is now an important and relevant opportunity to spark the protection conversation once more. We’ve all been through – and are still going through – a major event which will naturally make many question their financial resilience. To me, it feels that at the moment every conversation I have with someone who I haven’t spoken to for a while starts with me asking them how they’ve been getting on during lockdown. Indeed, these are the very same questions that you can use to open up a protection conversation with your customer. How have they fared through lockdown? How have they been? What about their family? Has this experience and the impact of COVID-19 changed their outlook on life and made them reassess their own situation? You can build all of these questions into the mortgage conversation. Also, if the customer has existing cover – perhaps even arranged by you – how much do they really know

about the additional services that most protection products provide, and the benefits these can give to both them and their families? Will people have thought about services such as access to remote GPs, counselling and physiotherapy? There has been a massive increase in the take-up of these services during the pandemic, but has your customer taken advantage, or are they even aware of what’s available to them? Even if the customer did take out protection cover last time, there is an opportunity now to review their cover

and assess how this is working for them. For example, if they only took out life cover, then what would happen if they were taken seriously ill and couldn’t work for a time? Where will the money come from to keep paying the mortgage and bills, and to maintain their lifestyle? What will they do in three, six or nine months’ time? All of us will run out of money at some point and won’t want to use up all our savings, making this an ideal time to discuss the options for protecting customers’ income. Regardless of the customer’s circumstances or the type of mortgage being considered, what’s clear is that the adviser must do a full job for them. There are no shortcuts when it comes to giving professional advice, and that includes the need for adequate protection advice. M I

Build your client’s protection needs into the mortgage conversation

MORTGAGE INTRODUCER FEBRUARY 2021

www.mortgageintroducer.com

REVIEW

GENERAL INSURANCE

Has the meerkat had its day? Geoff Hall chairman, Berkeley Alexander

have often talked in this column about the complexities of buying insurance and – in my opinion – the inadequacies of price comparison sites for treating customers fairly (TCF). Arranging the right insurance, as well as the right mortgage, should be the job of an experienced broker. In the UK, 11 million people use price comparison websites (PCWs), according to Mintel. They are clearly a popular way of buying insurance, but

the chinks are showing, and it’s clear that many now feel that the PCW model isn’t all it’s cracked up to be. Have they finally had their day? The aggregator market itself has become dominated by Compare The Market, with a 50% share according to commentators. Combine the impact of the Financial Conduct Authority’s (FCA) price-walking ban and the fine slapped on Compare The Market for preventing insurers and brokers from pricing their products cheaper on other aggregator platforms, and there is a huge questionmark hanging over PCWs.

The changing face of vulnerable clients P

rotecting vulnerable consumers is a key priority for the Financial Conduct Authority (FCA). A vulnerable customer is “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care,” and in July 2019, FCA research found that 50% of UK adults displayed one or more characteristics of being potentially vulnerable. FINANCIAL DIVIDE

This is a huge figure, particularly if you consider that many more people not previously classed as vulnerable may now firmly fit into that category if COVID-19 has impacted their health, emotional or financial resilience. It is probably safe to say that it’s more likely than not that a customer today could be classed as vulnerable. It is hard to ignore the financial divide in the UK, which has been exaggerated by the pandemic. At one end of the spectrum, the www.mortgageintroducer.com

Customers will likely have less incentive to shop around. Less churn is good news for brokers, as it will put renewed focus on value rather than price and drive more loyalty. Providers which appear on their systems are already being charged handsomely by PCWs to feature their products; with market forces beginning to move against PCWs, providers might be inclined to start looking elsewhere for their distribution. I am crystal ball gazing, and we’re certainly not there yet, but we could be seeing a shift in the minds of the public, and a renewed appreciation for good advice from financial experts – as has always been the case for their mortgages. M I

Unoccupied property and insurance policies

FCA confirmed that 12 million adults are struggling to pay their bills. At the other end, the housing market is booming, with a 7.5% price increase in 2020 – the highest rate of growth in six years, according to Nationwide – and with mortgage approvals hitting a 13year high. However, vulnerable customers are not just those who can’t afford to pay their insurance premium, and for the millions who are financially vulnerable, protection products will play a vital role in supporting them. For those that have them, it will be vital to ensure they can maintain this protection. Being vulnerable can be short or long-term due to personal circumstances, or it may even just apply to one transaction – just needing that one-off support to get their policy renewed, for instance. Either way, we must all be aware that the number of people who fall into this category has grown significantly during the pandemic. M I

hether residential, buy-to-let or commercial, every policy carries a definition of when it deems a property ’unoccupied’, the measures expected to protect the property – and if relevant its contents – and the potential impact to the policy cover. Here is a list of things that can be done to help protect against claims during lockdown: i. Inspect premises internally and externally at least once a week. ii. Refuse, waste and any mail should be regularly removed. iii. Premises should be fully secured using all protective locking devices available, setting any alarms and activating any CCTV. iv. Ensure that where possible gas and electricity supplies are turned off at the mains – except when required to maintain essential building services, alarms, computer servers, etcetera. v. Where possible, ensure any empty property has its water supply isolated at the mains. vi. If possible, water and heating systems should be fully drained-down to prevent freezing pipes. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

GENERAL INSURANCE

The antidote to instability Rob Evans CEO, Paymentshield

o say that 2020 had its ups and downs is more than putting it mildly. It’s no secret that last year bred major instability in the mortgage industry. Within the same six months, advisers witnessed not only the lowest ever recorded rate of monthly mortgage approvals, but also an appetite so high that lenders had to pull products. Although the launch of the biggest ever NHS vaccination programme in December revived hope for a socalled ‘normal’ 2021, many unknown quantities are still at play, making predictions around the future shape of the property market challenging. Take, for example, the end of the stamp duty holiday and the market disruption it is likely to bring. After a period of stimulated interest and increased mortgage volumes in 2020, many industry commentators have expressed concern over a slump at the holiday’s expiration in March. This is not a universal truth, though – there will always be a base-level demand, as people will always need to move home. Resilience and adaptability have been, and will continue to be, the insurance industry’s biggest strength into 2021 – that’s certainly been the case at Paymentshield. As much disruption and upheaval as last year brought, it also provided key insights into how we can evolve operationally and fortify our proposition even further. It should be no different for advisers, who should be thinking beyond March about making themselves indispensable in the long-term – whether by maximising new digital opportunities, or even using the ongoing Financial Conduct Authority (FCA) consultation on fair pricing to position themselves in opposition to price comparison sites as trusted and knowledgeable experts.

Assuming a solely reactive position does have its limitations, though. Overreliance on opportunities brought by external factors, such as stamp duty or FCA policy change, lends itself to quick, short-term wins. Advisers must think beyond those things that are subject to huge fluctuation, and instead aim to build resilience into their income streams in a more durable and sustainable way. To that, I say don’t underestimate general insurance (GI). GI may not be a lottery win, but when made a habit out of, it is a dependable and valuable asset – it helps keep the lights on. Besides the obvious, having income streams that advisers know are reliable has real lifetime value. In the immediate, it enables advisers to plan better, in the mid-term it helps them to weather storms where core income is more volatile, and long-term it can provide support through periods of unanticipated upheaval like 2020. Introducing a GI specialist – a dedicated employee responsible for the sales and administration of general insurance – into the business is a particularly cost-effective way to diversify into GI sales and build resilience into profitability. As soon as a book of business has been built up, generating a recurring

income becomes relatively low maintenance. Paymentshield’s CPD centre can help with this too, as it provides extensive resources on GI best practice. Paymentshield already works with 239 GI specialists nationwide, and it’s no coincidence that each of our top five highest-earning firms all have this position as an established role within their operations. Further still, with the financial pressures on mortgage advisers only set to increase following the FCA’s proposed 66% price hike in application fees, GI represents an increasingly resilient source of income. Insurers and intermediaries may have endured the upheaval of 2020, but this by no means guarantees smooth sailing in 2021 and beyond. Moving forward, it is crucial for advisers to adopt a two-pronged approach, both remaining agile to any challenges or opportunities arising from a mercurial property market, and taking measures to insulate themselves against current and future uncertainty, such as diversifying into GI. It is this blend of proactive and reactive strategies that will enable advisers to bear disruption in the market today, tomorrow, and for years down the line. M I

Advisers must remain agile to challenges and opportunities arising from a mercurial property market

MORTGAGE INTRODUCER FEBRUARY 2021

www.mortgageintroducer.com

REVIEW

GENERAL INSURANCE

Footballers, students and dancers Kevin Paterson director of sales and marketing, Ceta insurance

hen it comes to insuring our homes, most of us know that certain situations can make the process a little more complex. Thatched roofs, flood plains, subsidence and even lodgers can make arranging home insurance seem daunting, to both adviser and customer. The non-standard household insurance market is estimated to be worth in excess of £1.5bn and accounts for nine million properties – around 30% of the market – which often isn’t being insured. Many mortgage and general insurance (GI) brokers will also be familiar with the problems associated with obtaining home insurance, for certain types of occupations. There are several jobs considered high risk, and some of them might be surprising. Some occupations can cause insurance companies concern about the increased risk to the security of a home. These tend to include people who work from home, those who may have regular visitors to the property, or are often away from the property, and those who may keep valuable items in the house. Examples of the more predictable high-risk jobs would involve those who sell jewellery, lend money or provide gambling services. While some of the more unusual occupations that could cause concern are circus workers, tattooists and clairvoyants. I don’t think it’s anything to do with predicting the future or communicating with the dead. What I do know, is that insurers are getting increasingly detailed about pricing and the

www.mortgageintroducer.com

propensity to claim, even down to the job you do and the nature of clientele the business has. Also on the risky list are professional sports – especially footballers, wrestlers, boxers – and even students, although not necessarily for the same reasons. The likelihood of claiming is higher if you mostly work with cash, work nights, have a lot of parties and if you have a poor credit record. Football fans may remember not too long ago, when Liverpool midfielder Fabinho’s home was burgled while he celebrated the team’s Premier League win. Thieves broke in on the very day Liverpool were presented with the trophy. We hopefully all know about the risks of putting too many holiday pictures on social media while we are still away. According to Which? and MoneySuperMarket, overall home insurance premiums have reached their highest levels since 2013, with the average cost of combined buildings and contents policies rising to nearly £150 a year. The reasons are thought to be COVID-19 related. While more customers being at home should reduce burglaries, more people remaining constantly at home during lockdown can end up resulting in more accidental damage claims, and thus higher costs for insurers. With most children currently being home-schooled, trips, sprains and bruises are no doubt more common, as are the number of broken household objects. Put simply, children at home all day can be a recipe for accidents, and insurers know this. For homeowners, it clearly pays to have a broker to find the best deal. For brokers, it’s important to know who covers what and at what price – quickly and efficiently. For those brokers arranging cover in these areas, this could involve a lot of phone calls to different insurers, picking

Sportspeople are amongst the riskiest to insure

the cheapest and hoping for the best. Often, these brokers just might not bother at all. Graham Wilson, mortgage and protection adviser at Options Mortgage Centre, says: “You could be a butcher, baker or candlestick maker, but most people don’t realise that when they type in their occupation it’s impacting the premium. “When looking at non-standard risks, brokers need to consider several appropriate insurers, which can be done through choosing the most suitable quote platform. Don’t be fooled by indicative pricing.” Ceta Insurance built the first online quote portal for non-standard insurance 25 years ago, with a panel of insurers, and we write around 150,000 cases a year overall. We have a huge amount of data and can see where the trends are heading. In our experience, the riskiest occupations include celebrities, sportspeople, dancers, jewellers and pawnbrokers. The average premium for nonstandard home insurance sits at just £450 a year, which remains surprisingly low, and according to the Association of British Insurers (ABI), insurers pay out £17m per day in property claims overall. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

TECHNOLOGY

New lockdown, same threats John Dobson chief executive, SmartSearch

t all feels tediously familiar: hours of working from home, while homeschooling for many, and every day a round of video calls and remote client meetings. This latest lockdown has all the same hallmarks of the first time, almost a year ago. But this time around not only are we better prepared, but there are some significant differences. Not least among these is the fact that businesses have much more idea of what to expect and how to deal with operating in a lockdown. Also, crucially, sectors such as the property market are still able to function, at least at the time of writing. However, the order from the government to return to working from home means that once again those regulated businesses that require ID verification for customer onboarding processes will be vulnerable to money laundering and financial fraud. Sadly, the same old threats are still there, and while the industry has learned better ways of working remotely, so too have the organised criminals looking to exploit potential gaps in security. During the first six months of 2020, we witnessed a 66% rise in fraudulent activity compared to the last six months of 2019. Figures from Barclays in the autumn show that, since the first national lockdown, evidence of cryptocurrency fraud has been increasingly reported. We are now living with the biggest wave of the coronavirus outbreak, and we must ensure that now more than ever businesses are protected from paying the substantial price that comes with online crime. If there is one lesson we can learn from the first lockdown back in March, it is that businesses have

MORTGAGE INTRODUCER

individual accountabilities to ensure they are compliant, and their antimoney laundering (AML) policies are impermeable. The big shift we expect to see is many more businesses in this sector looking to electronic verification to onboard customers more securely. Not only is this quicker and more secure, it is also COVID-safe. The technology is available to make a remote ID check for an individual online in two seconds, and a check for a business in less than three minutes, with bank account checks, facial recognition and document verification to deliver additional layers of security for clients that are seriously risk averse. These are browser-based systems that can be up and running within 24 hours.

With the potential for several months of restrictions ahead, businesses need to have the systems in place to ensure they are compliant with know your customer (KYC) and know your business (KYB) legislation. Firms in the property sector, agents, brokers etcetera, are exposed to the risk of fraud because ID verification processes are manual and outdated. This time around, there’s no excuse for leaving these gaps in security open for exploitation by criminals, as electronic verification presents the best alternative. We must be prepared to adapt to these changes faster than criminals, to ensure that businesses are 100% protected against such attacks. M I

We must adapt our processes faster than the criminals

FEBRUARY 2021

www.mortgageintroducer.com

REVIEW

TECHNOLOGY

Appropriate intelligence in 2021 Steve Carruthers principal mortgage consultant, Iress

rtificial intelligence (AI) has been a buzz-phrase for years; a holy grail where machines alleviate us of the mundane tasks and begin to contribute to our understanding of complex problems. But it is appropriate intelligence – not artificial intelligence – that will be key in the coming years. AI offers consistency of output, if not emotional intelligence and sophisticated reasoning. However, our world since 2020 has regularly demanded bravery, compassion, judgement and imagination. If our experiences of the past year have proven anything, it is that far from eliminating humans from the processes of everyday life, the blend of technology and people is central to our ability to thrive. To underline this point, in the coming months it will be humans – and in particular the Chancellor – who will determine the future performance of the mortgage market, with announcements on the future of the stamp duty holiday and a budget that will need to address employment support, tax rises and the next generation of Help to Buy assistance. The pandemic has demanded exceptional responses from the lending industry. In part, its legacy has been that many have speedily understood and leveraged their human experience into automated processes to better understand the new lending environment of furloughed income and payment deferrals. What has emerged is a new kind of AI which we call ‘appropriate intelligence’, where technology and www.mortgageintroducer.com

human experience work in symbiosis for the best possible outcome. Technology reduces the heavy lifting, allowing the professionals to then add nuance and a deft touch to complex decisions. Understandably, our sources of risk data have been undermined by this pandemic. Even data sources that have proven reliable, such as automated valuation models (AVMs), have effectively been supported by once-ina-lifetime government initiatives that have supported house prices. The lending risks have changed, and so have the risks of conducting business remotely by working from home. The appropriate use of technology has never been so important. ADOPTING TECHNOLOGY

Our Mortgage Efficiency Survey last year provided some powerful insight into how lenders were not only coping with the pandemic, but also planning to move forward. There were areas of commonality. While some lenders, such as the fintech specialist type, were better equipped to deal with the new ‘virtual’ mortgage market, all our interviewees planned to adopt technology to blend with the talents and skills of their people. Lenders are at different stages of their processing and efficiency journey, but the momentum and direction are constant. Those that have recognised they are behind now feel the need to catch up to those that are ready to make a ‘quantum leap’ and use data for greater automation. Lending processes have always been driven by liquidity and funding, fiscal policy events and regulation, and the process has been largely unchanged for the last 20 years. Data and technology will need to support processes that are warranted, not simply automate current practice. Current technology often supports

what has always existed, but we have detected new thinking where lenders are now entering the digital world and are reimagining mortgage processes. COVID-19 has given many the opportunity to reassess what kind of business they want to be and how technology supports that. Accessing and using data via integrations with third party suppliers to support the mortgage application process is now a must. This should be a priority for those lenders which, with challenging cost-income ratios and tight margins, want to truly improve their efficiency across the journey. Equally, connecting the end-to-end journey is of vital priority for everyone involved, so that customers experience smoother and better outcomes. Lenders all expressed the opinion that the pandemic has strengthened the need for advice. The sentiment was echoed by many was that there is anecdotal evidence that consumers value advice more at times like these. All lenders with branches foresaw a repurposing of these, and acknowledged that their distribution footprint might further rely on an intermediated one in a post-pandemic world where borrowers’ requirements will be more complex. Arguably, lenders will need brokers now more than ever before. Appropriate intelligence is not a buzz-phrase but a reality that is already well established in the minds and actions of many lenders. It is a journey upon which we have embarked with all our tech offerings. A huge amount of collaboration is happening now. Lenders, distribution networks and clubs, conveyancing firms and valuation firms, sourcing systems, customer relationship management (CRM) platforms, sales and origination systems, trade bodies and many more are working hard to create a more connected and efficient journey that supports the people doing business. COVID-19 has forced a dramatic rethink and shift in priorities, but it has not brought the prospect of better human and technology interactions to a standstill. In fact, it has accelerated it. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

SPOTLIGHT

BROKER CONVEYANCING

Growing the Alliance Mortgage Introducer catches up with Mark Snape, CEO of Conveyancing Alliance, to discuss the firm’s recent sale

t the end of November last year, conveyancing distributor Conveyancing Alliance Ltd (CAL) – which includes the adviser-focused brand, Broker Conveyancing – was sold by ULS Technology to Project Ophelia Bidco, in a deal worth £27.3m. The sale was completed less than four years after ULS itself bought CAL from its senior management team, in a deal reported to be worth up to £12.5m. Last year’s deal therefore seemed to represent excellent business for ULS, more than doubling the value of CAL during its tenure and allowing ULS to repay all of its existing group debt facilities. Mortgage Introducer talked to the man who has been at helm of CAL during the developments, chief executive officer Mark Snape, about what has driven the ongoing success of the business, what the new owners will mean for the proposition, and how he intends to deliver further growth, particularly in the advisory space. The management team at ULS Technology must have been overjoyed with the deal, given CAL has more than doubled its valuation in four years. Did you get any parting gifts from them? The sale went through relatively smoothly. It is a perfect solution for all parties. My parting gift was an amicable split from the group, and I received the thanks of the board and particularly the chairman, Martin Rowland. You’ve been at the helm of CAL through half of those four years. Can you outline what you’ve done to improve profitability? Yes, I’ve been at the helm for over two years and have had the benefit of working with a truly exceptional team, and receiving the full support from the get-go from the exceptional Keith Young, who is now MD. My partnership with Keith has been at the core of the extraordinary growth. We are both big on continuous improvement, teamwork, empowerment, transparency, and clear, strong leadership, and we thus created an absolute meritocracy. CAL is a very high-performing business that has succeeded in the most challenging of markets, for different reasons, in both 2019 and 2020.

MORTGAGE INTRODUCER FEBRUARY 2021

You’ve stayed with CAL in the new position of chief executive officer. Was there ever a temptation on your part to stay with ULS, rather than move with CAL? I thoroughly enjoyed my group role at ULS. I was offered the opportunity to stay with ULS, but both my head and heart told me to stay with CAL. I see ULS moving down a different pathway in the future. I think the growth trajectory and opportunities for CAL to grow further are immense, and I want to oversee the next part of this exciting journey ahead. I am also extremely confident that the partnership with O’Neill Patient (ONP), and all this offers, will deliver even more opportunities for growth and new levels of success. My energy levels are extremely high, so I expect to see great things being achieved in the next five years. World domination is my goal. The new owners, Project Ophelia Bidco, also own the volume conveyancing firm O’Neill Patient, which is one of the biggest operators on the CAL/Broker Conveyancing panel. What do you think attracts them to CAL? I think it’s probably best to get this answer from the horse’s mouth, so to speak. Here is what Andy Scaife, CEO of O’Neill Patient has to say: “CAL has a number of attractions for us:  A great team with a proven track record.  It’s a growing business, gaining market share.  It offers its customers market-leading service levels – an ethos shared by the ONP Group.  It secures distribution for ONP’s conveyancing services, allowing us to more confidently increase capacity.” What are the new owners getting in acquiring CAL at this point in history? Scaife again: “We are acquiring CAL at a point when it has clearly demonstrated that it is well-established in the market and has grown over a number of years. We anticipate this to continue. “We have some new tech which is being launched in the marketplace (inCase) and CAL is a fantastic platform to accelerate this launch as well as to develop www.mortgageintroducer.com

SPOTLIGHT

BROKER CONVEYANCING all of our precious law firms, both ways, so I expect business as usual to continue. What does the future look like for CAL? Can you shed some light on your short, medium and longterm ambitions?

Mark Snape the product further, utilising their broad expertise and detailed market knowledge, for the benefit of CAL’s customer base as well as the ONP Group’s wider customer base.” What will be their involvement in the business on a day-to-day basis? Scaife says: “Our day-to-day involvement will be limited. We are backing the excellent team at CAL, who have consistently demonstrated strong performance, to continue to develop and grow this business. We are simply here to support them and provide additional resources to assist in that growth. “We will be working together with the CAL team, pooling our expertise and knowledge to further develop and improve our respective market-leading offerings, to ensure we continue to lead the market and provide our customers with the best available, and constantly improving, services.” What do the other conveyancing firms on your panel think about the deal? Has there been any worry about potential competition issues here because of the O’Neill Patient link? The core of the Broker Conveyancing proposition is choice and value for our brokers. They have access to the biggest and best law firms in the market, at the lowest prices. This must be retained, so our other conveyancing firms will see this continuing. Keith and I reached out to all of them the day the sale was announced to reassure them of this and to answer any questions immediately. All of the calls went extremely well. It must be remembered that the highest levels of trust exist with www.mortgageintroducer.com

My goal is to quadruple the current business levels within the next three to four years. I know this is possible. As I detailed before, my energy levels are high and I also know that Andy and his team at ONP will back CAL with total support and, critically, provide us with access to the brilliant tech they have now and are developing further. This will give Broker Conveyancing the cutting edge that is needed to not only future-proof the business, but also provide the platform on which to layer more and more volume. Advisers will also benefit from better case access, and much slicker and quicker completion processes, and Broker Conveyancing will continue to pay on exchange so it’s a win-win situation for all parties. Why do advisers keep coming back to Broker Conveyancing? What do you offer that others don’t, in what is an especially competitive space? We have already seen way above market average growth for many years, and this was replicated in 2020 when Broker Conveyancing produced its best ever year, across all performance metrics. Broker Conveyancing is the best all-round business proposition I have ever worked with, with the best people. We work with the best law firms, offering the best prices, allowing the brokers to set their own referral fees, and offering simple yet highly usable technology. It all works seamlessly and will only get better again in the future. It must also be remembered that we stayed fully open during the initial lockdown, so were always available to provide invaluable support to advisers. What about the mortgage market in general for advisers? How do you see 2021 panning out, and where would you hope to be with CAL in another four years? I think we will have a very buoyant mortgage market in 2021. I have written in the past on many occasions about just how resilient and robust our housing market is, and this belief was further endorsed in 2020. We entered this year with huge momentum and record-level pipelines, so I expect this level of activity to continue, even after the stamp duty holiday deadline. I plan to be with CAL for a long time to come. The business is now operating at record levels, and my goal of quadrupling the volumes in the next three to five years will ensure that I need to be highly energised and focused. I am committed to overseeing this. M I FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

EQUITY RELEASE

An unforgettable year Alice Watson Xxxxxxxxxx head of marketing and communications, xxxxxxxxxxxxxxxx, Canada Life xxxxxxxxxxxxxxxx

t barely needs repeating that 2020 was an extraordinary year, in which global uncertainty played havoc with people’s personal finances. Despite this uncertainty, it is notable that the equity release market has proven remarkably resilient. However, new trends have emerged around why people are releasing equity from their homes. Perhaps unsurprisingly, it is being used more often to fund living expenses, rather than a ‘once in a lifetime’ holiday or other purchase. In the first three months of 2020, 20% of Canada Life’s equity release applications were to pay for a holiday,

but by Q2 this had dropped to 15%, and by Q3 and Q4 it was 12% and 11%, respectively. This decline is not surprising, but it will be interesting to see whether the vaccine rollout will lead to a resurgence in travel. Another interesting trend can be seen amongst customers releasing equity to buy a new property. This represented a relatviely small number of customers in Q1 (8%) and Q2 (6%), but almost doubled in Q3 (16%) and Q4 (18%). One reason for this increase could be the stamp duty holiday for UK properties, which has also led to a significant rise in property prices across certain regions. Looking across other areas of ‘luxury’ spending, such as buying a car or caravan, we have seen a decline in interest, so property is certainly standing out in this area. It remains to be seen if this trend will continue when the stamp duty holiday ends.

One of the most popular reasons – chosen by two-fifths of customers – to release equity in 2020 was to fund aesthetic home improvements, which is particularly fitting for the year that everyone stayed home. However, the most popular reasons were for much more essential purposes, with many choosing to pay off the remainder of their mortgage (45%), consolidate existing debts (24%) or fund day-to-day living (18%). Over this incredibly volatile year, the equity release industry has proven itself to be flexible, with products that can be used to fit a variety of purposes. The world will continue changing, but people will always want to feel in control of their retirement and use their overall wealth to secure the financial futures they aspire to have. This is where advisers, with an holistic view of the retirement market, can help their clients plan for and achieve that future. M I

JOIN THE THOUSANDS OF INTERMEDIARIES STREAMING WEBINARS EVERY WEEK!

Stream every webinar on demand + register for upcoming sessions on our NEW hub at www.mortgageintroducer.com

REVIEW

EQUITY RELEASE

The right people for the right job Stuart Wilson CEO, Air Group

e are now just a month and a half away from the end of the stamp duty holiday period, and it’s fair to say the market is working overtime in order to get as many cases completed so purchasers benefit from the savings available. At the time of writing, while there have been calls for some kind of extension to the deadline, nothing has been announced as yet. Indeed, in responding to a petition calling for an extension, the government’s response was pretty unequivocal: there wouldn’t be one. However, I’m also mindful of this government’s capacity to U-turn quickly, especially if the figures we’re seeing of potential aborted transactions are anywhere near correct. It would be somewhat ironic for a government which has committed significant time and resources to improving the home purchase process over the past couple of years in order to help cut down on the number of transactions falling through, to be the same administration that presided over a situation where huge numbers had to be aborted. For that reason, I don’t rule out a change of mind on this – one that might be potentially announced at next month’s budget. In the meantime, of course, conveyancers in particular are under significant pressure. We have been here before – five years ago, when the government upped stamp duty for additional purchases, and many landlords bought before the deadline so they didn’t have to pay the extra 3%. www.mortgageintroducer.com

The conveyancing industry responded remarkably well to this increase in activity, but there was no pandemic, vast swathes of staff weren’t working from home, and they were not dealing with anything like the activity we’re now witnessing. These issues are just as relevant for equity release and later life lending purchase clients – and their advisers – as they are for anyone else currently waiting for a completion. The pressures to complete before 31 March are the same, and over the past few months we’ve been asked to help or intervene on cases which may have been stuck at a particular stage. While we haven’t been able to achieve miracles, there have been a number of cases where we’ve been able to help remove a blockage and get those stuck transactions on their way again. This is another benefit for advisers who are part of a wider organisation such as ours. However, what we have seen time and time again – and I’m sure later life advisers will agree on this – is that later life and equity release cases often get stuck for a very good reason, specifically at the conveyancing stage. The reason being that the client has opted not to use a specialist solicitor, which has immediately resulted in the brakes being applied. Nothing against those firms which don’t process significant amounts of business in this sector, but the differences compared with those specialist operators who know exactly what is going on, where the problems might be, and how they can remove them, is often stark. Part of the Equity Release Council’s (ERC) rules are around the customer’s right to choose their own conveyancer, but there’s clearly nothing stopping advisers pointing them in the right direction. Particularly if the choice is going to be a family or high-street

solicitor with little or no experience, who has to ‘learn’ the process, and who is going to take time doing it. This option – especially in the current environment, and for purchase cases that need to complete by the end of March – will invariably be the wrong one. Our own data shows that in Q4 of last year, some lenders were reporting an average delay of 20 working days when using non-panel – in other words, non-specialist – solicitors. You’d certainly want to save your clients a month in time to complete, wouldn’t you?

“Part of the Equity Release Council’s rules are around the customer’s right to choose their own conveyancer, but there’s clearly nothing stopping advisers pointing them in the right direction” Then there is the cost element for the client. There might be a belief at the client level that ‘specialist’ means ‘increased cost’ – however, the exact opposite is true. As mentioned, those firms which rarely work in the equity release or later life space need time to get up to speed, and time costs money. I’ve seen examples of case fees ranging between £1,500 and £2,500 because of this, when our specialist solicitors on panel will have an allinclusive package at the outset which is much cheaper and far more effective. That also means no hidden costs which only appear as the work is carried out. Having excellent service and quality from the solicitor is imperative at any time, but especially now. The positive news is that advisers are acutely aware of what constitutes this, and which solicitor firms can deliver it. Plus, they’re able to save the client time and money, and get them through to completion. In other words: take control of this part of the process, point the client in the right direction and ensure the case gets to its natural end point in a far quicker timescale. It truly is a nobrainer for all concerned. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

REVIEW

CONVEYANCING

Addressing remortgage fears Karen Rodrigues sales director, eConveyancer

e are just a few weeks into the new year, and many people will start to feel their motivation to keep up with resolutions slipping. For some, 2021 will be the year they want to get their finances into more robust shape, and yet it appears that one of the biggest opportunities for doing so is being overlooked. The mortgage bill is the largest expense that most homeowners face each month, so you would think that those who want to cut their outgoings would start there. However, it’s striking that so many are apparently unaware of the savings they could make when they reach the end of their initial fixed or variable period. A new study by TSB found that an extraordinary 89% hadn’t considered remortgaging as a money-saving option, even though the same study suggests that those on standard variable rates (SVR) could save an average of £2,000 a year from doing so. It’s not exactly small change – that money could be the difference between borrowers keeping their head afloat or languishing in an overdraft all year. But it’s the reasons why so few borrowers are thinking about remortgaging that should interest brokers the most. One in four say they would find the process stressful, while 16% are concerned about hidden fees. A whopping 51% reckon that they are actually happy with their existing rate, even though many of them don’t know what that rate is. There is a huge opportunity for brokers here. The reality is that an awful lot of these borrowers will be in a stickier financial position than a year ago thanks to the ongoing economic effects of the pandemic, and they could really use the expertise of a broker to

help them find a new deal that will lighten their financial load. Some of these borrowers won’t have used a broker before, so they need to understand just what a difference an adviser can make. If you aren’t the one highlighting those selling points, then someone else likely will. There will also be your existing client bank. Are you making the most out of those relationships that you’ve already started? You have a headstart in that you already know when their deals are maturing, providing you with the perfect opening for a conversation about a remortgage. After all, if you don’t start that discussion with your client, then the lender will. The latest stats from the Bank of England’s Credit Conditions Survey show that lenders expect demand for remortgages to increase in this quarter. There is no shortage of borrowers coming to the end of fixed rates this year, who could use the assistance of a broker in choosing their next product. If they don’t hear from you, then they may opt for the path of least resistance and go for a product transfer themselves, potentially costing them money in the process. There is clearly a need for education, too. The benefits of remortgaging need to be made clear – and some of the myths need to be dispelled as well. As brokers know only too well, a remortgage doesn’t actually have to be a stressful, lengthy process.

One of the reasons we launched Rapid Remortgage last year was to cut out some of the barriers that can hold up remortgage cases, and ensure that they get over the line at speeds not dissimilar to those of product transfers. Rapid Remortgage is available on cases which make use of our DigitalMove proposition, with a starter pack dispatched as soon as it’s clear that the borrower qualifies. Borrowers can get confirmation from our partner solicitors that they are completionready by the end of the working day after that pack is returned, meaning that within just a few days they are off that pricey SVR and onto a more affordable mortgage. These regular conversations are the key to a lifelong relationship with your clients, ensuring that they keep coming back to you with all of their financial needs, not just those related to home loans. Do they have protection in place to help cover those mortgage payments should they fall ill and be unable to work? Do they have life insurance to pay off the mortgage so that their loved ones aren’t left in the lurch? There is a lot of attention on the purchase market at the moment, and understandably so given how close we are to the end of the stamp duty holiday, and the ongoing calls for it to be extended. Ensuring that the relationships with your clients stretch beyond that initial purchase will put your business on a solid footing for the future. M I

Regular conversations are the key to a lifelong relationship with your clients

MORTGAGE INTRODUCER FEBRUARY 2021

www.mortgageintroducer.com

REVIEW

CONVEYANCING

Staying in the loop at all times Xxxxxxxxxx Mark Snape xxxxxxxxxxxxxxxx, managing director, xxxxxxxxxxxxxxxx Broker Conveyancing

s a distribution business, one of our key ongoing issues is around how to secure adviser loyalty, while at the same time working with our solicitor partner firms to provide the level of work they need and to ensure the service they give back is of the highest quality. Being in the middle of that dynamic gives us an opportunity to work on both sides of the case, and to ensure that everyone gets what they want, without necessarily having to be in constant contact with each other. What we tend to find, particularly during an incredibly busy time for everyone, is that as the stakeholder that works between both adviser and solicitor, we can help move things along and respond accordingly, rather than every single party feeling they don’t have the information they require. Sound familiar? Advisers are no doubt in the same position. How do you maintain client loyalty whilst working with partner firms such as lenders, providers, insurers and conveyancers to deliver the service you – and your client – want to see? How do you act as that go-between, ensuring your client is kept in the loop without feeling the need to constantly communicate with a stakeholder who may be up against it in terms of both time and resource? These are the constant requirements of the service we deliver, and it’s hopefully by ensuring the process is as smooth as possible and that there’s a real level of transparency and communication, that we get to do it all over again many times for those who use us. www.mortgageintroducer.com

That, of course, is sometimes easier said than done, especially when the competition is looking to do exactly the same, and you can’t simply rely on the loyalty of your customers, even if you have done an excellent job for them in the past. I know that many advisers often feel behind the eight ball when it comes to client retention, simply because of the strength of proposition pitched against them. I’m not even talking about other advisory firms, but lenders themselves, particularly in the mainstream space, which sometimes talk a very good game when it comes to supporting intermediaries but still place huge resources and investment in trying to make sure that business comes direct at the end of the deal. THE EASY ROUTE

That certainly adds an extra frisson when it comes to the complexity around working in the mortgage and housing market space, and you sometimes wonder where many lenders are coming from, particularly when they are likely to get the biggest share of their business through the intermediary market anyway. Can customers be blamed for clicking on a product transfer link, when it is made so easy to do so? We talk a lot about the tech utilised in our market, and I can guarantee that some of the sharpest technology and apps being used right now are designed to product transfer existing customers swiftly into another deal without necessarily having any adviser involvement. In that sense, it requires constant vigilance from advisers, and it certainly requires constant contact and communication throughout the life of a mortgage. Particularly when it gets close to the ending of a deal, this can ensure that the client doesn’t just move products without any adviser showing them

what actually might be the most suitable deal for them. We feel similarly about our own offering. You have to fully appreciate every day that we have no God-given right to the business we secure, and that no one is tied into using us whenever they have a case. Over time, of course, you hope to be delivering a service – to both adviser and client – that keeps them coming back, but we also have to be on our wits continuously, looking for ways to maintain and improve what we do, in order that business is retained. Ours is also a highly competitive space, and it means that the platform we use has to remain both slick and simple to use, the firms we use have to give us their best fee-earners to provide the best service and the best chance of completing within the necessary timescales, the payment system we have – paying on exchange – must work seamlessly, and the team we have must be fully committed and able to show tangible benefits every time they are called upon. I could go on, but the reason for all that is simple – it’s very easy for advisers to go elsewhere, much as it is increasingly easy for clients to use a different route or a different adviser. Now, sometimes there may be nothing you could have done to stop that loss, but the important point is that you have done everything you can to keep them. What you can’t complain about is a client or customer going elsewhere when you know you didn’t live up to the highest of standards, you didn’t keep in contact, you didn’t make it as easy as possible for them, and you didn’t get it right. Then, it will make that loss perhaps even worse because you’ll know you could have done more. My view is that I never want us to think ‘if only…’ when it comes to how we interact with advisers and the proposition we can offer. I’m sure advisers will feel exactly the same – leave nothing on the field, as the sporting phrase goes, and you’ll keep hold of many more clients than you lose, and probably add a great deal more to those you’ve already got. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

THE OUTLAW

THE MONTH THAT WAS

THE

THE THE

AND THE

“A

re we nearly there yet?” Don’t think that adults don’t ask that question too! The answer at the moment might be “not quite, but we’re definitely nearer the end than the beginning of this sh*tshow!” So, hang in there. There are plenty of reasons for optimism. The first relates to the vaccines, of course. Not great news, admittedly, if you are a Brusselsdependent EU citizen as opposed to an independent British one – within which category I presently include the restless Scots, but more on those below. Congratulations to all those scientists worldwide, whose efforts have been incredulous. Frustratingly, their feats are also now allowing lazy and complacent Boris and his incompetent cronies to squirm off the hook for their appalling performance prior to the vaccines’ emergence. In our own world, we wait with bated breath for either the Spring Budget or an announcement soon regarding the extension of the stamp duty holiday. Famous last words, I accept, but for me

MORTGAGE INTRODUCER FEBRUARY 2021

Andy Hornby: Sit and smile

Every month, The Outlaw draws some tongue-in-cheek parallels between society at large and a mortgage market in flux this is quite literally a ‘mortgage job’ racing certainty. The Chancellor simply has to affect some kind of extension or tapering. February itself should be a super month for brokers. As if December’s record-breaking figures on applications weren’t enough, we also saw buyers registered on estate agents’ books at their highest level for 16 years. Which makes you wonder why certain estate agents still behave outrageously – which I will discuss below! February also sees the completion of countless new-build projects up and down the country. Indeed, several intermediary businesses appear to be getting on the front foot.

First, we have The Money Group. Recent figures suggest that the country is presently smoking record levels of weed, but these guys won’t be a part of those statistics, considering they think that they might get 200 members signed up to their new mortgage club offering. But their ambition and entrepreneurial spirit can be applauded – I like their model. Less impressive is the renewed noise levels over at both Habito and Trussle. Lest we forget, these keyboard warriors have now received investment funding totalling £63m and £27m, respectively, since inception. Some of it was actually taxpayer assisted. The latter is busy celebrating its Financial Conduct Authority (FCA) approval, whilst the former recently brought us a “phantasmagoric” rebrand. In totally separate news in the world of footie, the £47m paid for Chelsea’s Timo Werner and the £72m for Arsenal’s Pepe appears to be prompting the weekly question: why??? Back to our environs, well sort of. Another month goes by and there’s yet another estate agency owngoal. This month we saw an online estate agent claiming to sell homes for £1, before then going on to force its customers to pay over £700 to use its conveyancing services – or £300 to opt out of the service. The Advertising Standards Authority (ASA) rightly jumped on this and neutered the adverts, but it is yet another example of why its a gross dereliction of duty that the government still hasn’t sought to regulate estate agents. Sticking with a government body and a policy statement that essentially involves kicking a can down the street, we have the FCA once again. It seems that, once more, there is no rush to call folk to account for negligence or misdemeanours. It’s now over a decade since the Halifax Bank of Scotland (HBOS) debacle, and still the only individual who has been censured is Peter Cummings – who, amongst his other various peccadillos, assisted Phillip Green on an industrial scale. Folk like former CEO Andy Hornby must sit there and smile every time the FCA changes its executive, delaying further any kind of justice for those who lost thousands. Wall Street is hardly a den of virtue, but at least they lead their miscreants out of offices in handcuffs when malpractice or gross incompetence is suspected. Until we see that in the UK, nothing will change I’m afraid. There is no fear of consequence. From the villainous to the virtuous and back to mortgages, and specifically the building societies. Thank God for them. Their share of new mortgage approvals hit 28% in the third quarter of last year. Along with the 60 or so CEOs in the sector, the head of policy at the Building Societies Association (BSA), Paul Broadhead, does a great job. Many building societies are of course now fully digitilised, but they retain the common and personal touch which many of the PLCs no longer do – namely, a www.mortgageintroducer.com

Vaccine roll-out: Congratulations to the scientists

conversation with an underwriter isn’t like a privileged papal visit. Talking of the common touch and being identifiable with a following, have any other readers noticed the nauseating media-creep now occurring which features disgraced Labour party apparatchiks and mandarins? Each of them somehow trying vainly to stay relevant years after their own mishaps in public office. Tony “we’ve only got 45 minutes till the bomb drops” Blair has been lecturing anyone who would listen on what the lockdown should look like, and not far behind him is Peter “I got my mortgage from the Britannia” Mandelson writing sanctimoniously in The Times. But in this season for television comedy and drama awards, the top prize goes to Ed “bacon sarnie” Miliband. Has anyone seen his two recent demented and excitable appearances on The Andrew Marr Show? Dear me...this cabinet is the worst in living memory and yet Labour still cannot crack a lead in a single opinion poll. They have as much chance of producing a creditable Prime Minister in the next decade as that cretin referee Mike Dean has of getting a VAR decision right. →

THE OUTLAW

THE MONTH THAT WAS

Boris Johnson: Flaky

Unlike the vainglorious Dean, some industry heavyweights caught the news in a positive way last month. NatWest’s Miguel Sard appears to have finally made some headway, and their service issues are thankfully abating. Congratulations and best wishes also to Mark Lofthouse on a relaxing retirement. Mark is definitely one of the good guys, and is as studious and articulate a professional as you could hope to meet. He will be missed. On which subject, I understand that this publication has now gained the guest-writing patronage of ex-AMI chairman Martin Reynolds. Reynolds has had to suffer seeing his beloved baggies managed successively by three complete clowns in Alan Pardew, Tony Pulis and now Sam ‘Ave a slice. So, he is more entitled than anyone to vent his spleen on mortgage matters to calm his rage. Given his credentials, I’ve high hopes that his piece might become something akin to Outlaw-Lite…he’ll probably play himself in with a few safe singles to third man or cover point before he hopefully cuts loose in the spring. To finish with, I have three bold observations of my own, on our increasingly fractious Scottish brethren, the upcoming budget, and the chronic state of obesity in this nation.

MORTGAGE INTRODUCER FEBRUARY 2021

“Preserving the union”…that’s why our tubby PM was in Jockestan last month. I just don’t get it. The “union” was split asunder in June 1977 when the tartan army smashed up our goalposts at Wembley. Mel Gibson then concluded the Scoxit by convincing four million folk that Braveheart was a true story. I say: let ‘em go. This past year we have learned what really is important. Next month, I will hypothesise on what currency the Krankies will use and how they plug a £10bn funding gap. Scotland is a beautiful country. I have countless exceptionally talented Scottish pals. Both of those matters will far outweigh the importance of whether Scotland is independent or not. It’s a non-issue. Let’s get over it. We can also then repatriate our much-decorated industry godfather John Malone back to Ing-er-lun. To Rishi Sunak – our next PM hopefully, and soon. We will likely get a COVID–specific slate of measures on 22 Feb, before a more future-focused statement on 3 March. Sunak will doubtless tinker with several tax lines, but he truly needs to get stuck into Capital Gains Tax (CGT) and completely reform it. According to the Office for National Statistics (ONS), 97% of CGT revenue is paid by those aged over 35, with most of those who are actually caught by the tax being above 55. It simply isn’t right that the virus is paid for equilaterally, and even as a Tory voter it’s clear to me that the necessary tax rises must fall on those with the broadest shoulders, who are also the ones that have made the most use of the NHS and public services these past 30 years. All that said – and surely amid much rancour from some readers – the time has surely also come for an obesity tax. Amid the irresponsibly pathetic headline “This is healthy”, the shocking front cover of Cosmopolitan last month said it all about modern day Britain. Let’s just all forgive the obesity. Chalk it up to people just expressing their identity, and f*ck who has to pay for it all (the taxpayer). Our COVID-19 death rate is directly related to the fact that we are the most obese nation in Western Europe – and only Malta and Turkey are worse. 80% of people admitted to hospital with COVID-19 are obese or overweight. The whole mess typifies our flaky PM. One minute he’s dieting like a dervish and calling for Joe Wicks to assist his fat-loss crusade. The next he’s piling on the pounds again and allowing photographers in to No 10 to picture him on the phone to Biden with his blubber legs disrespectfully splayed across his desk. Meanwhile, next door at No 11, a chiselled and lean guy is working 16-hour days to sort Boris’ mess out. All power to Rishi, a leader in waiting who also won’t bottle the difficult decisions the way that his portly neighbour consistently has. Right, rant complete. I’m off to my pilates class… M I www.mortgageintroducer.com

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

FEATURE

AFTER COVID

LIFE AFTER 50

MORTGAGE INTRODUCER

FEBRUARY 2021

www.mortgageintroducer.com

FEATURE

AFTER COVID

Natalie Thomas looks at the long-term impact on the market and asks what changes we will see once the crisis finally abates

here has been little time over the last 12 months for firms to pause and contemplate what the mortgage and housing landscape might look like post COVID-19. With every passing month, it is becoming increasingly evident that it will not simply be a case of business as usual once – or indeed if – the devastating health crisis comes to an end. Instead, the long-term fallout from the pandemic will likely have far reaching implications for years to come, for the country as a whole and the mortgage market.

COVID www.mortgageintroducer.com

CONSOLIDATION ON THE CARDS The regulator started off the new year with a gloomy forecast as to how the pandemic could impact firms, and indeed already has. Its Coronavirus Financial Resilience Survey revealed that those in the retail lending sector experienced the greatest fall in profits during the first wave of the pandemic. The retail lending sector includes, but is not limited to, non-bank lenders, mortgage third party administrators and mortgage intermediaries. The Financial Conduct Authority (FCA) data shows that retail lending firms saw their median profit fall by 44% during the first wave of the pandemic, with 67% expecting that overall, the pandemic will have a negative impact on their net income. Around 59% of those surveyed anticipated this fall would be between 1% and 25%, while 28% said 26% to 50%, and 9% envisaged a 51% to 75% fall in their net income. The FCA believes that out of the 23,000 businesses it regulates, 4,000 are at a greater risk of failure due to the pandemic. So, what can firms do to safeguard their future? Times of uncertainty usually stir up talk of consolidation in the mortgage sector, as businesses look to solidify their position. We have already seen one notable acquisition this year, with the buyout of Southend-based brokerage Mortgages Online by Coreco – both appointed representatives (ARs) of the Mortgage Advice Bureau (MAB). Through the acquisition, Coreco hopes to expand its business outside of London, as well as bolster its specialist, commercial and online offering. → FEBRUARY 2021

MORTGAGE INTRODUCER

FEATURE

AFTER COVID

Access to finance Steve Seal managing director, Bluestone Mortgages

he coronavirus crisis has had a huge effect on households across the country. More than 150,000 people have been made redundant, almost 10 million have been put on furlough, and almost 2.5 million people have taken a mortgage payment holiday. What’s more, many self-employed workers will have seen their income drop significantly over the last 10 months, while other consumers will have been unable to keep up with their credit commitments as a direct result of the crisis. Indeed, there has already been a surge in the number of County Court Judgements (CCJs) taken out against individuals who have struggled financially during the pandemic. Between October and December last year, 194,203 new CCJs were issued in England and Wales, compared with 112,261 in the previous three months. The harsh reality is that instances such as salary reductions or CCJs could be detrimental to borrowers’ long-term financial positions, and subsequently, their likelihood of securing a mainstream mortgage later on – even if they are perfectly eligible for a loan.

As more customers emerge from the pandemic with complex borrowing needs, specialist lenders will provide a lifeline to those who could benefit from manual underwriting decisions and personalised solutions. For this reason, we could see a rise in the number of specialist lenders looking to capitalise on this growing demand, as well as mainstream lenders which may want to diversify into the specialist lending space as they recognise the opportunities available. The changing credit profiles of those customers impacted by COVID-19 signals a significant opportunity for advisers too, particularly those who aren’t currently working in the specialist lending market. Brokers are likely to hear from a growing number of customers who need help to secure lending, prompting more firms to enter the specialist market. Support from lenders will be key to ensuring that brokers are equipped to meet this rise in demand, however, and providing greater support to brokers will ultimately result in greater support for customers too. By working together in this way, lenders and brokers will be able to ensure that customers who emerge from this crisis in a more precarious financial position than they were before will be able to access the financial support they need.

Peter Brodnicki, chief executive of the MAB, expects the market will see further consolidation, and warns that those firms unwilling to adapt their business models could be at risk. “Generally, bigger firms acquire smaller firms,” says Brodnicki. “But I don’t believe purely acquiring to gain scale is what the next five years will be about. “It’s about understanding the distribution models of the future and acquiring or merging to safeguard that future and be successful in it, rather than maybe consolidating outdated business models that are likely to have a limited lifespan.” He adds: “Evolving technology and intermediary business models will result in significant change in how we capture and retain clients, as well how we provide advice and facilitate the mortgage transaction. Once we start to notice that change, then consolidation

MORTGAGE INTRODUCER FEBRUARY 2021

will gather significant pace, so if you haven’t grasped what will change around you and are not advanced in your preparations, then there will certainly be some historically successful businesses that will be at risk. “Some forward-thinking companies might look to acquire or join forces with others to strengthen their proposition, while there will be others who – for whatever reason – do not have the personal appetite to make the changes required and instead seek a buyer. “The estate agency sector is a good example where that is already happening.” USE TECH OR LOSE OUT Lockdown has not only accelerated the necessity for firms to embrace technology when interacting with clients, but created the need for change internally. “We are unlikely to just go back to the way things were,” says Simon Jackson, managing director of SDL Surveying. “Firms will need to work out how to have people working from home and the office, what each one is for and how they effectively exist together without losing any productivity, quality or control. “Most firms were thrust quickly into working out how to use the digital tools available, and in truth have done a great job, but will need to work out how to embed them.” Jackson also believes that as part of this advancement we will see a continued move of businesses out of London and most likely away from tower blocks and big offices. LENDERS MUST ADAPT Steve Cox, chief commercial officer at Fleet Mortgages, believes that the role of the business development manager (BDM) has changed forever. He explains: “Now what’s needed is a mix of face-toface, events, conferences and Zoom or Teams – we will engage with advisers in the ways they want in order to support their businesses. We are social creatures and the mortgage market relies on relationships, so the ‘old’ world will return, but not to the same extent as pre-COVID.” Nevertheless, while Brodnicki also believes that working habits will change, he cautions a move too far in one direction. He says: “Some firms in all sectors have gone too far too quickly, disregarding the clear benefits of working together in office environments, which impacts so much on the company culture, personal development, innovation, long-term performance and mental health.” Those firms looking to prosper in a post-COVID market will also need to meet clients’ expectations, says Natalie Strong, senior relationship manager at Mortgage Engine. She explains: “During the pandemic, borrowers have become used to being able to complete a mortgage application from the comfort of their own home, and www.mortgageintroducer.com

FEATURE

AFTER COVID as a result, many may be resistant to going back to the days of face-to-face meetings, ID photocopies, in-person certifications and valuations. “Embracing technology is going to be crucial for both sides of the market to help them navigate future changes and maintain the momentum they have already achieved in the digital space. “This includes further utilising back-office systems, such as application programme interface (API) driven platforms, to enable advisers and lenders to access customer data quickly and efficiently. “12 months ago, we would never have thought that automated valuation models (AVMs) would soon be the norm for mortgages. However, use of these types of platforms is set to continue among lenders and advisers as they gear up for the long-term impact of the pandemic, in which a complete return to normal is looking like a distant memory.” MAINSTREAM BECOMES SPECIALIST Another area where we could see long-term change is in lenders’ product offerings. There is currently a clear divide when it comes to the type of borrower a mainstream and specialist lender will cater for. If anything, the pandemic has moved more traditional lenders further into their mainstream fold, with specialist lenders left to address those with more complex needs, but can this be maintained? “I expect mainstream lenders will increasingly move into more specialist lending,” says John Phillips, national operations director for Spicerhaart and Just Mortgages. “We were seeing innovation from mortgage lenders before COVID-19, with an increase in products and lending to borrowers who were credit impaired, had complex incomes and two or three jobs. This will continue and the self-employed market will also grow.” David Hollingworth, associate director of communications at London & Country Mortgages thinks the number of self-employed borrowers impacted by the pandemic will be too great for mainstream lenders to ignore. He says: “Any big lender will still want to be lending to the self-employed, so it will be interesting to see if lenders are going to become more flexible in terms of how they view self-employed income. “There will be those who have a sustainable business but have seen their income drop at some point during their last two years due to the pandemic. Will this type of business become the preserve of specialist lenders that are prepared to look a bit deeper under the surface?” Cox thinks a COVID-repair product might be an idea for lenders to explore. “Innovation might come in the streamlining of criteria for those impacted by COVID-19,” he says. “For example, catering for an exemplary customer who suffered temporary financial hardship because → www.mortgageintroducer.com

Homes for everyone Henry Jordan director of mortgages, Nationwide Building Society

s a member-owned organisation, we have a duty to use our mutuality in supporting the UK to build a brighter future post-Brexit and coronavirus. Mutuality is built on people uniting to achieve more together than they could alone, which is why we have launched a new cross-sector group to help the UK recover and rebuild. Our UK Consumer Insight Panel will include representatives from Asda, Citizens Advice, Fairer Finance, Ipsos MORI, Kingfisher, MoneySavingExpert.com, Resolution Foundation and Which?. The panel will share knowledge and insight, which we hope will spark debate on how we can build a better society. We will look to publish our outputs and share with the government. For Nationwide, there are four key areas of focus this year to help to rebuild with confidence:  Home – how and where we live  Work – how and where we do our jobs  Community – how we interact with the world and each other  Financial wellbeing – how we support ourselves and others in times of need Home is a central part of our lives, but it remains an unreachable dream for many. Communities need decent affordable homes for renters and buyers. Many first-time buyers continue to struggle because of the difficulties saving for a deposit. Demographic changes, shifting priorities around family, and affordability issues all also suggest that homes need to be adaptable to allow people to live differently in the future. For many elderly people, downsizing their homes or accessing equity release can be valuable ways to support younger family members get their first home.

Sustainability also remains an important issue. Making homes greener is perhaps the single biggest issue where individuals can affect change, as homes account for 15% of all carbon emissions. In the third quarter of 2019, just 1% of new homes built achieved the highest energy efficiency rating. However, retrofitting homes for sustainability, for example installing more efficient boilers, is relatively expensive and often insufficient.

“Irrespective of tenure, higher standards of construction are critical to making homes greener and more efficient” Nationwide has set itself a target of half of its mortgage book being EPC C rated by 2030. We have also made £1bn available in green further advances, giving preferential rates for home loans linked to sustainable improvements. WHAT’S NEXT FOR HOMES? The role the home plays in our lives and the impact it has on our wellbeing has come to the fore in lockdown. As greater emphasis is placed on where we live, we collectively need to invest more time and resources locally to ensure communities are attractive and supported with the right infrastructure. None of this will be possible if we cannot improve the prospects of those looking for homes, support people who are struggling financially to stay in their homes, and support landlords through a tough outlook of greater arrears and involuntary evictions due to people being unable to afford to remain in their homes. Irrespective of tenure, higher standards of construction are critical to making homes greener and more efficient. It remains one of the biggest challenges we face today.

FEBRUARY 2021 MORTGAGE INTRODUCER

FEATURE

AFTER COVID

Buy-to-let will show its strength Paul Brett managing director, intermediaries, Landbay

espite the scourge of COVID-19, one thing it can’t do is stop the need for people to have rooves over their heads. The buy-to-let sector will continue to forge ahead with a steady flow of house purchases and a strong remortgage market. March will be an interesting month, as it is the fifth anniversary of the 3% stamp duty surcharge on second properties. There was a surge in property sales and mortgage lending in March 2016, with 45,000 loans totalling £7.1bn going to landlords, a rise of 142% on March 2015. Some of those loans would have been 5-year fixed rates that are now due for remortgaging. Buy-to-let (BTL) will continue to be an attractive proposition for investors, and rents will hold up. Yields may fall because house price growth is likely to exceed rental growth, but this picture is across the board, as yields on all assets are falling. Demand for rental property remains strong for structural reasons; for example, the continuing rise of single person households, and some people’s preference for the flexibility to move home as and when they need to. There is also the very real issue of first-time buyers being unable to afford increasingly large deposits and

therefore having no choice but to rent. This has been exacerbated over the past year, with COVID-19 forcing people into furlough, redundancy and unemployment. Some would-be firsttime buyers saving for a deposit have had to dip into their savings to cover rent and household bills. I do think the mortgage sector will get back to normal quicker than people think. For example, there will be flexibility around home and office working for all parts of the industry. More businesses will move online, and so all parties will need to invest even more in technology. In the medium-term, I think lenders will remain cautious – arrears are likely to pick up in 2021 and 2022, and even though recovery is on the horizon there will be a long tail to this crisis. With the increase in house prices over the past 12 months, professional landlords are likely to be releasing equity and remortgaging to leverage cheap debt. They can bolster reserves for future acquisitions and absorb stock sold by amateur landlords and those who are financially stretched. Going forward, house prices will prove resilient. The most important structural shift happening, and likely to continue in the next two to five years, is the continuing professionalisation in the market, including the use of limited companies. All this supports demand and appetite from buyers, renters and investors, and therefore a strong and growing buy-to-let market.

of COVID-19 but has then rebuilt financially – not credit repair, but COVID-repair products.” He goes on to say: “The specialist market will definitely grow as a result of the pandemic – quality advice will never be more needed than in the coming years. We don’t know the extent of economic damage as yet – furlough, payment holidays and other government support are masking the end collateral damage of COVID-19.” Seb Murphy, head of mortgage finance at JLM Mortgage Services, believes that we will only see mainstream lenders start to expand their offerings if the market slows, saying: “Lenders’ activity is so high at the moment that a lot of the larger lenders can focus

MORTGAGE INTRODUCER FEBRUARY 2021

on their core market groups and still produce record figures. However, there is now a huge under-served market for those impacted negatively by COVID-19. It will be interesting to see how these clients are served.” With an increased demand for specialist products, lenders will also need to guard against taking on too much risk. “It’s unlikely that lenders are going to start expanding how much they lend to applicants with adverse credit histories or with non-standard or time-limited income streams,” says Gemma Harle, managing director at Quilter Financial Planning. “At present, while the demand remains buoyant, even the specialist lenders can still attract business without taking on too much risk. With the ongoing economic uncertainty looming over us, the lenders will remain understandably cautious and these types of customers will continue to find it hard to find a suitable mortgage.” As well as catering for those with more complex needs, Kate Davies, executive director at the Intermediary Mortgage Lenders Association (IMLA), believes the specialist market could play a key role in helping those excluded from the government’s Help to Buy equity loan scheme. “Since its launch in 2013, around 17% of buyers using the government’s Help to Buy equity loan scheme have been previous homeowners,” she says. “That’s equivalent to 47,368 people. From 1 April this year, the scheme will only be available to buyers purchasing their first home, meaning a significant cohort of people will need alternative routes into homeownership. “Private sector alternatives to the current Help to Buy scheme are being developed, but these are still yet to launch, and it could be some time before any loans are issued. Whilst a number of mainstream lenders have already returned to the 90%-plus [loanto-value (LTV)] market, others remain cautious about re-entering or becoming over-exposed in the higher LTV sector. So, it’s possible that some of the smaller specialist providers will look to enter this space.” READY FOR A FALL? Unlike the financial crash more than a decade ago, the pandemic is not centred upon the financial markets, which is good news in terms of lender liquidity. However, this does not mean the market will be without its challenges moving forward. UK Finance is predicting a drop in gross lending in 2021 to £215bn, down from £233bn in 2020. By 2022, it expects a slight rebound to £230bn. Nevertheless, when you compare this with annual gross lending of between £140bn and £220bn in the years of 2009 to 2015, the outlook looks encouraging. Generally speaking, UK Finance expects a buoyant product transfer market over the next few years, as well as an increase in homeowner remortgaging. It is predicting a slight drop in buy-to-let (BTL) www.mortgageintroducer.com

FEATURE

AFTER COVID and residential house purchases in 2021 and 2022, compared to 2020. “Younger workers, particularly those on lower incomes, are more likely to have been furloughed or lost their jobs,” the trade body says in its Q3 2020 Household Finance Review. “Even if the labour market recovers quickly, many will have seen a material loss of income through the pandemic. This is likely then to bear down on the numbers of would-be first-time buyers [FTBs] who might have been looking to buy without assistance over the next year and possibly beyond. Although young workers may have felt the economic impacts of COVID-19 most acutely, the effects have been widespread, and many amongst older cohorts will have found their finances more stretched.” As such, this may also impact the ability of parents and grandparents to gift or lend deposit sums to their children or grandchildren, the trade body believes. Another area where the market could also see a drop off is buy-to-let. There is a notion that when people are unable to buy they will turn to renting, which in turn produces a high demand for buy-to-let. This is not always the case, however. “In the example of the 1990s downturn, a significant number of households disappeared entirely, rather than demand shifting to the private rented sector,” says UK Finance in its Q3 outlook. “In other words, people moved in with other households – typically family members – as incomes could no longer support either rent or a mortgage. “In such a scenario, both FTB and BTL demand are more severely constrained, reducing two key elements of liquidity at the bottom of the housing market. This in turn hampers the formation of housing chains, constraining the ability of potential homemovers to sell.” A GREENER AND MORE DIVERSE HOUSING MARKET As with the mortgage sector, the housing market’s outlook depends greatly on how quickly the country can recover from the pandemic. Halifax is predicting a fall of between 2% and 5% in 2021, but beyond that, a sharper drop in prices looks unlikely given the supply and demand issues the UK faces. “There are upward and downward pressures on house prices,” says Karen Rodrigues, sales director at eConveyancer. “Higher unemployment will clearly be a challenge, but at the same time there is still a structural undersupply of property.” She goes on to say: “More working from home means that people can be more flexible about where they live and so they are likely to make decisions to buy a property based on their life circumstances, rather www.mortgageintroducer.com

than needing to be near work. So, we will probably see an ongoing trend amongst some to move out of towns and cities, and this could create some ongoing liquidity in the market. “Similarly, with such disruption to the hospitality and leisure industries, there may be a trend towards towns and cities from people in search of work.” Murphy would like to see lenders differentiate between UK regions in terms of their lending criteria. “As an industry, we have to start accepting that the UK has four or five different regional markets, and lenders should become brave and start to lend different amounts in different areas,” he says. “We would expect the Bank of England base rate to stay low, and very possibly turn negative. Prices will rise in many areas but may fall in others.” Just as borrowers could start to question where they live, we might also start to see an increased awareness of how they live. Davies notes that, post-COVID, the issue of reducing carbon emissions will be high on everyone’s agenda. “IMLA research found 29% of lenders have, or plan to launch, a green mortgage product, and consumers are also enthusiastic,” she says. “One in five mortgage borrowers are willing to pay an extra £100 a month for a green mortgage, although the majority of lenders we spoke with actually plan to offer these products at a similar price to existing ones. “The main challenge continues to be in finding the most cost-effective and practical way of identifying and delivering green initiatives, which help to reduce household carbon emissions. Industry, government and customers will need a strong dialogue to establish lines of responsibility so that time, effort and resources are used to create positive change.” A LOOK TO THE FUTURE It seems incomprehensible at the moment that the mortgage market could simply slide back into the old ways of doing things once the pandemic is finally under control. Some things seem inevitable: a growing demand for online advice, a rise in borrowers with more complex needs and a potentially worsening situation for firsttime buyers. Much of what comes to pass, however, will depend on the wider economy and how the industry itself adapts. Yes, technology will revolutionise the market going forward, but equally the fact remains that this sector is a social one. Historically, this has played a part in many of its successes. It is also an innovative market, and has continually risen to the challenge of helping clients find their place on the housing ladder. The pandemic will no doubt bring change to the market, and whilst that does not necessarily have to be a bad thing, how firms react will define their future prosperity. M I FEBRUARY 2021 MORTGAGE INTRODUCER

PANEL

MARKET

FORWARD THINKING

At the recent Mortgage Introducer round-table, the panel spoke about the ongoing stamp duty saga, helping underserved customers and the rise of green mortgages

t’s safe to say that the beginning of 2021 looks very much like the year just gone. A third national lockdown continues, and will do so until early March at the time of writing, but the vaccine drive is well underway. The mortgage market has remained a hive of activity during these uncertain times, with industry stalwarts optimistic about the next 12 months. The year will not come without its challenges, with the stamp duty holiday set to end next month and a slow yet steady return to high loan-to-value (LTV) lending as service levels continue their recovery. Mortgage Introducer spoke to key industry figures from John Charcol, the Intermediary Mortgage Lenders Association (IMLA), HLPartnership, MCI Club, Barclays, Coreco, the Association of Mortgage Intermediaries (AMI) and Alexander Hall to discuss a possible stamp duty holiday extension, the need to help underserved customers in these challenging times, and the rise of green mortgages. THE STAMP DUTY SAGA An online petition reaching almost 140,000 signatures at the time of writing has prompted the government to discuss an extension to the stamp duty holiday. The 70-minute virtual debate on 1 February was led by

and make your steps count For intermediary use only

MORTGAGE INTRODUCER

FEBRUARY 2021

www.mortgageintroducer.com

PANEL

MARKET

“The self-employed are very tricky to underwrite at the moment because it is completely historical. It is about setting expectations” CRAIG CALDER

Member of the Petitions Committee Elliot Colburn MP, while Financial Secretary to the Treasury Jesse Norman MP was appointed to respond for the government. During the virtual debate, MPs appeared to lean towards a tapering of the stamp duty holiday, but no final outcome was reached. It is expected that a decision will be announced in the Spring Budget. IMLA sent a letter to the Treasury before Christmas suggesting that it should rethink its approach to stamp duty, and received a response detailing that the policy was not to extend the holiday, but that the Treasury will “keep in mind all correspondence sent to them.” Kate Davies, executive director at IMLA, says that this response suggests government is keeping the door open on this matter. “The latest HMRC figures reveal that the annual tax take from stamp duty is around £12bn,” Davies says. “If I were the Chancellor, why would I give that up? I’d want to keep the door open even if I were to extend the holiday. But I think we have now reached a conclusion that extending the holiday is just kicking the can down the road. If we have a problem with 31 March, we’ll have a problem with whatever the later date would be.” Statistics from Rightmove suggest that more than 100,000 people will miss out on the stamp duty holiday, but despite this, both Davies and Andrew Montlake, managing director at Coreco, believe that the government will not extend it. “If you extend the holiday it just creates one cliff edge after another,” says Montlake. “You want to avoid that. I think potentially they [the government] will say that for transactions in progress you can still get the holiday if you exchange by the 31 March. But that causes its own issues. There is no perfect way out of it, but what the government needs to try and do is avoid an awful lot of people missing out.”

This stamp duty saga has no clear answers, with some delegates suggesting a tax reduction following 31 March, whilst others feel alternatives could be sought to help those most affected. Ray Boulger, senior mortgage technical manager at John Charcol, suggests that reflection is key in order to move forward. “What the government should do is look back at what has happened as a result of what they did last year to see the impact that it has had on the property market,” he says. “If they do some sensible cost-benefit analysis, the answer would be that if you increase the starting point from £125,000 to £250,000 or £300,000, because the amount of stamp duty raised at these lower price levels is relatively small, the additional activity in the market would more than compensate and would actually benefit.” When the initial stamp duty deadline was announced, the government was under the assumption that the first lockdown would be the last; unfortunately this has not been the case. Due to this change of situation, Boulger agrees with Montlake that if an extension is not granted, then a deadline for exchanges could be set for 31 March, rather than completions. PURE POLITICS Ministers are currently considering plans to replace council tax and stamp duty with a property levy, with the government said to be looking into the impact of removing both forms of taxes. The replacement levy would likely be based on the current value of a home, but Davies is critical of these plans. “Council tax is a tax based on the value of a property,” she says. “We have eight bands in England and up to nine in Wales. The problem is that no government has had the nerve to go for a national revaluation →

“If you look at the pace at which it has improved since mid-December, I’d like to think 95% LTV will be back in some form by the end of the year, hopefully a lot sooner” GREG CUNNINGTON

Be a part of our new ‘Keep Moving’ step challenge For intermediary use only

www.mortgageintroducer.com

FEBRUARY 2021

MORTGAGE INTRODUCER

PANEL

MARKET because it would be politically unpopular. An egg is an egg, and surely this is just a rebrand?” This news has been widely branded as pure politics, with Montlake agreeing with Davies’ point of view. “This news feels like an unnecessary distraction,” adds Craig Calder, director of mortgage products at Barclays. “There is enough going on. This might be a 2022/23 idea, but it just doesn’t feel like it should be happening right now.” SERVICE LEVEL RECOVERY Service levels have been severely impacted during the pandemic, with the withdrawal of product ranges and completion times reaching record highs last year. However, in the last quarter of 2020 and the early months of this year, high LTV products, largely removed during the pandemic, started to re-emerge and more ranges have become available once again. “I have been amazed how quickly that problem has turned around full circle,” says Greg Cunnington, director of lender relationships and new homes at Alexander Hall. “If we go back a few months, there was genuine concern about the operational issues, time to offer and things getting stuck. Honestly, it is as good now as it was pre-pandemic. “There are a couple of stragglers, but the rest of the market seems to be back to 48 to 72 hours for [service level agreements (SLAs)] as standard. With Barclays, we have had some purchase offers on the same working day this year, which our advisers are absolutely raving about. I generally believe that these issues have come round the other side.” Mel Spencer, head of MCI Mortgage Club, says that the support lenders have provided has helped speed up the time taken to get cases through, as she has seen a lot of lenders sending across information to help brokers during this time.

“I think brokers need more education on specialist lenders to know that there are others out there. They are still there to help” MEL SPENCER

“I think lenders have got cleverer around the criteria – Santander for example pulling out of a market to resolve service issues and then coming back in when they are ready” NEIL HOARE Neil Hoare, commercial director at HLPartnership, suggests that back in October most lenders saw price as the reason to slow their volume down, with a pricing increase causing an influx of cases which were more than they could deal with in a short space of time. “I think lenders have got cleverer around the criteria – Santander, for example, pulling out of a market to resolve service issues and then coming back in when they are ready,” Hoare says. “This provides more lenders in the space to ease volume. I think certain broker markets have also become cleverer around who does what and why.” Calder speaks of how Barclays is addressing these service issues, pointing out the use of automated valuation models (AVMs) and the introduction of desktops at the start of the pandemic as another way to get through the delays. He says: “I think using that type of service will keep those wheels moving, and not being so reliant on valuers going out. It is very patchy across the country because of what is going on in each region and how bad the pandemic is in certain areas.” EN ROUTE TO NORMALITY There is a consensus from the delegates that, regarding service levels, the market is almost returning to normal. However, Montlake doesn’t believe that the market has fully recovered. “I would argue that it is not quite normal,” he says. “We are still having issues. If you speak to brokers around the country, they don’t feel yet that things are on par with where it was before. “It feels like you have a two-tier economy here. The normal stuff is going through – we get offers out of Barclays within 24 or 48 hours even on purchases sometimes, which is fantastic. The problem comes when something touches the sides, for example with

Walk 200k steps** in February for the chance to win a brand-new Peloton Bike+* * Prize includes a Bike+ basics model. Monthly subscription packages are not included. ** Submitted evidence of either the total number of steps taken or the average daily amount walked during February will be required.

For intermediary use only

MORTGAGE INTRODUCER

FEBRUARY 2021

www.mortgageintroducer.com

PANEL

MARKET the self-employed or something tricky within the case. These may have gone through without too many issues before, but now they are not.” Montlake emphasises that moving forward, despite the gains made in regard to service levels, the focus must be on making it equal for everyone. The problems facing the self-employed in these difficult times have been well documented, and Montlake argues that when you have an employed customer and a self-employed customer, you should not be favouring the former – the industry should be able to deal with both. Until the successful processing of all cases, he argues that the market is not yet back to normality. “The self-employed are very tricky to underwrite at the moment, because it is completely historical,” Calder argues. “As businesses remain closed, we can’t provide an offer because we are unable to prove income. It is about setting expectations.” The question of when these types of customers will be able to obtain a mortgage is disputed, with Robert Sinclair, chief executive of AMI, asking what Barclays’ view is for these types of consumers, and when they may be able to have a successful application. For those who have already had an offer through, but made the lender aware that they are no longer working, Barclays is pending offers and telling these customers that they should show evidence of trading once lockdown is lifted if they are self-employed, or for furloughed customers, prove that they are earning the same amount as they were pre-pandemic upon returning to work or through furlough schemes. “All brokers want is clarity on how they can help the customer think through where they might get to in the future; providing a plan as opposed to frustration,” Sinclair responds. For this section of borrowers, Davies highlights that specialist mortgage providers are still there, which is key

“The government should look back at what has happened as a result of what it did last year, to see the impact on the property market” RAY BOULGER

“The idea that consumers would be happy to pay more for green mortgages? It’s easy to say you will, but when push comes to shove many will say ‘thanks but no thanks’” KATE DAVIES when high street lenders may not be able to help. This is a point on which Spencer agrees, saying: “We support the high street lenders, but the reason I have been bringing on all of the specialist lenders and building societies at MCI Club in the past six months is to fill the gap for those clients who cannot be helped by the other lenders. “I think brokers need more education on specialist lenders to know that there are others out there. They are still there to help.” THE RETURN OF HIGH LTVS High LTV products have slowly but surely returned to the marketplace, helping many first-time buyers in particular get onto the housing ladder. “I think if you look at the pace with which it has improved since mid-December, with new lender entrants at 90% LTV and criteria improvements, it is really positive,” says Cunnington. “I’d like to think 95% LTV will be back in some form by the end of the year, hopefully a lot sooner.” Montlake shares Cunnington’s optimism, saying: “There is lots of choice now in [the high LTV] market. What we are going to see I suspect, after the stamp duty holiday deadline has passed, is lenders coming back en masse into that arena. I think all of the firsttime buyers that were not able to take advantage of the stamp duty holiday has caused some pent-up demand, which will cause increased competition and rates hopefully reducing.” Hoare suggests that some co-ordination is needed to get back into the high LTV space, in order prevent case overflow and operational issues. “Lenders have been quite clever in the way they have come back into the 90% LTV space,” Sinclair adds. “They have come back in focusing just on newbuilds or first-time buyers to give them a narrow →

Open to anyone with an active registration with Barclays For intermediary use only

www.mortgageintroducer.com

FEBRUARY 2021 MORTGAGE INTRODUCER

PANEL

MARKET

“All brokers want is clarity on how they can help the customer think through where they might get to in the future; providing a plan as opposed to frustration” ROBERT SINCLAIR niche and get a foothold. That criteria selection to get them in and just take enough is quite clever. I think returning to the market with these niche points is how they will progress.” IS THE FUTURE GREEN? Green mortgages have hit the headlines recently, with the government revealing plans for net-zero carbon emissions in the UK by the year 2050. IMLA published its Green Mortgage report in October last year, which revealed that almost half of consumers had never heard of a green mortgage; however, one in five would pay an extra £100 per month for a green mortgage, perhaps presenting a shift in attitude. “We decided to commission the research just to get more of an idea of what consumers, lenders and brokers feel about green mortgages,” says Davies. “The idea that consumers would be happy to pay more? I’ll believe it when I see it to be honest. It is easy to say you will do it because it feels like you are saving the planet and it sounds like a great thing, but when push comes to shove and you’re being asked to find that extra £100 per month, many may say ‘thanks but no thanks’.” IMLA is currently in the process of responding to a recently released government consultation, with an eye on certain issues, such as where the onus of energy efficiency lies. Davies says: “I’m sure there is more lenders can do to help borrowers, but we need to get our heads around who is responsible here. I believe it is down to the property owner to manage the energy efficiency of a property.” Davies adds that the idea of lenders providing better rates for properties with better energy ratings is flawed. There is scope, she continues, but it will take some time for this to come to fruition, thanks to “muddled thinking at government level that needs challenging.”

Calder agrees with Davies from a lender point of view, suggesting that current thinking surrounding green mortgages would be difficult to implement. “For being green you feel like you should be rewarded, not having a levy – I think it is completely the wrong way round,” he says. “There is no consumer who is going to pay £100 more just to get a green badge,” Montlake notes. “What they will do is take the cheaper product and put £50 towards an environmental charity of their choice. I understand where you could potentially, as a lender, say if your energy rating is A or B we will give you one rate, and if your home isn’t as energy efficient then you will pay a slightly higher rate. This should hopefully, over time, encourage people to, where they can, make their homes more energy efficient.” Collaborative thinking is key when it comes to the implementation of green mortgages, and it cannot simply be passed down from government, causing everyone trying to “tick boxes,” in Montlake’s words. “I think there is an opportunity for it in the buy-to-let space and buy-to-let refurb products, where there is an incentive to refurb a property in the right way,” suggests Hoare. “But just a ‘save the planet’ type mentality I don’t think will create any desire to have a green mortgage.” Overall, the market is looking healthy and is well into the process of getting back to pre-pandemic levels. This year is set to have its challenges, and there continue to be certain consumers unable to obtain a mortgage. But with the return of high LTV products and the national lockdown set to end in the next couple of months, the hope is that these underserved customers can be served once again. It remains to be seen how the industry manages the challenges ahead, but if the past few months are any indication, it could be a positive year for a market that has been battling difficult times. M I

“It feels like you have a two-tier economy here. The normal stuff is going through. The problem comes when something touches the sides, for example with the self-employed” ANDREW MONTLAKE

Full details of how to enter will be confirmed via email this week. Make money work for you Barclays Bank UK PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct. Authority and the Prudential Regulation Authority (Financial Services Register No. 759576). Registered in England. Registered No. 9740322. Registered Office: 1 Churchill Place, London E14 5HP. For intermediary use only

MORTGAGE INTRODUCER FEBRUARY 2021

www.mortgageintroducer.com

KEEP MOVING

For intermediary use only

and make every step count

Barclays is excited to announce the launch our new ‘Keep Moving’ step challenge. In order to qualify for the chance to win a brand-new Peloton Bike+*, all you have to do is walk 200k steps** over the course of February. Open to anyone with an active registration with Barclays. Full details of how to enter will be confirmed via email this week. Make money work for you

Prize includes a Bike+ basics model. Monthly subscription packages are not included. Submitted evidence of either the total number of steps taken or the average daily amount walked during February will be required. *

Barclays Bank UK PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 759576). Registered in England. Registered No. 9740322. Registered Office: 1 Churchill Place, London E14 5HP. IBIM10289 February 2021

LOAN INTRODUCER

SPOTLIGHT

No second guesses Loan Introducer catches up with Adrian Moloney, group sales director at Precise Mortgages, to discuss second charges, regulation and COVID-19 How do you see the second charge mortgage market

performing in 2021?

As confidence in the market grows, I fully expect to see second charges performing well in 2021. With many customers choosing a product transfer in these challenging times, a second charge may well be the best and cheapest way for them to borrow money to consolidate or improve their property. Interestingly, as people’s circumstances have changed, we can see through the level of enquiries what some of the common reasons for applications are. We’ve seen far more complex enquiries around credit and income, suggesting an increase in customers with changing needs who are looking for alternative ways of borrowing. What are some of the challenges for lenders in continuing to offer second charges? Fortunately, many lenders don’t have the issues they had in 2008 when wholesale funding dried up, as many – us included – now have banking licences and are therefore well capitalised to fund. The biggest challenge during this unprecedented event has been establishing a balanced appetite for risk, based on the uncertainty surrounding future house prices and employment stability. Falling house prices and mass redundancies would both be red flags to a second charge lender, but trying to second guess the extent of them is extremely difficult. Responsible lending is all about understanding a customer’s current and long-term ability to repay their first charge and second charge mortgage. It’s also about trying to gauge the current value of their property, and how that could be affected in the longterm by COVID-19.

speedy and consistent when it comes to making informed decisions and supporting our broker partners. The FCA will look again at the second charge market in 2021, does the sector have anything to worry about? I can only speak on behalf of Precise Mortgages, but I don’t believe there’s any cause for concern. We had no issues with the transition in 2016, and have the benefit of a highly experienced team processing regulated mortgage contracts. The process of obtaining ‘second charge consent’ remains a bugbear for the industry, do you see this being automated anytime soon? This isn’t an issue for second charges uniquely, it’s a restriction placed against the property by the mortgage lender, so unless they all agreed to adopt an automated process, there will always be some manual intervention. I do understand the frustrations it may cause; perhaps as an industry we need to do more to ensure we reply in a timely manner to these requests. OSB Group recently announced a restructure of its sales team, how will this impact the second charge side of the business? We’ve set up a dedicated team to manage our second charge relationships. It will be led by Emily Machin, head of specialist finance, who brings a wealth of knowledge and experience of specialist lending to the role. M I

In February 2020, OSB closed Prestige Finance and created a ‘centre of excellence’ in Wolverhampton – how is that going? The Centre of Excellence is going very well. We already had a highly regarded proposition, and I believe that since its creation it’s only added to our reputation for being knowledgeable,

MORTGAGE INTRODUCER

Adrian Moloney

LOAN INTRODUCER

MARKET

Building a positive reputation Xxxxxxxxxx Tony Marshall xxxxxxxxxxxxxxxx, managing director, xxxxxxxxxxxxxxxx Equifinance

here do second charge mortgages fit into your portfolio of potential funding options for customers? I imagine the responses to this question will still be mixed. Many continue to see second charge mortgages through the prism of a historical judgement of a sector which, to be fair, has had its wild west moments in the past. Others with more open minds will have weighed up the pros and cons and matched those conclusions against today’s Financial Conduct Authority (FCA) oversight of the sector. From the increasing use of second charge lenders and the new business we are generating in a property market with one eye on the pandemic, I can safely say that the open-minded have voted to support a second charge option, where appropriate, because reputationally they now feel comfortable doing so. While demand for second charge remained consistent in 2020, borrowing dropped, because so many lenders had to withdraw from active lending during the first lockdown. Specialist lenders like Equifinance had no choice but to temporarily withdraw due to uncertainty borne out of the inability to meaningfully underwrite a case given the restrictions on valuations, the Scottish Land Registry closure, and customers being able to legitimately request a payment holiday post-funding. This was mitigated for many of the high street first charge lenders, who had access to special government funding and were able to carry on lending. www.mortgageintroducer.com

Now in 2021, the second charge market is rebounding rapidly, and although it will take time to reach its pre-COVID levels, the signs are looking good. LESSONS OF THE PAST

Having fought so hard to gain wider acceptance among the broker community, it is important that the industry does its utmost to maintain and further improve the reputation of the sector. Every lender and master broker has a responsibility to ensure that their offerings are consistent with regulatory rules and also meet a more personal criteria in their assessment of lending risk to themselves, their funders and, most importantly, their customers. What we must not do is race to the bottom and take unnecessary risks to achieve volume. Instead, we must encourage our partners in bringing to the table customers with good affordability and genuine reasons to borrow, while supplying products that provide real benefit and not taking advantage of their circumstances. In 2021, competition for new business is heating up, and the second charge sector is no exception. The sense that the sector is a legitimate lending source is beginning to take root. In the debt consolidation area, what it does not need now are products which offer borrowers, regardless of their recent problems caused by COVID-19 or other factors, an easy way to borrow more when their ability or intent to repay is severely compromised. People in debt can be vulnerable and don’t need the siren call of yet more borrowing waved enticingly in their faces. Rescheduling debt is not necessarily a bad thing, and can have many benefits. Outside of the pure mathematics, it can provide a return to normality for the customer without worry, and long-term aspirations can

be realised with access to mainstream financial products, along with freeing up the customer from higher cost debt. When used correctly as part of a holistic approach to financial planning, it can really change the course of someone’s financial future. Lending sources prepared to ignore credit issues and income verification in order to build market share, however, might tell themselves and introducers they are responding to customer needs, but are just deluding themselves. Their funders might like the new business initially, but as history has taught us with high risk lending, the growing rate of arrears – and ultimately complete defaults – will not be to their liking in the end.

“Rescheduling debt is not necessarily a bad thing and can have many benefits. Outside of the pure mathematics, it can provide a return to normality for the customer without worry, and long-term aspirations can be realised with access to mainstream financial products, along with freeing up the customer from higher cost debt” Though it can be attractive business for some, advisers must be sensitive enough to know the difference between using such products for genuine debt consolidation, or just as a way of kicking the can down the road, prolonging the customer’s fight to avoid confronting the reality of their situation. However, it is up to the second charge lender community to recognise the responsibility that they share with brokers to maintain the line on assessing customers and keeping product criteria at a level which truly helps those who can be helped. The reputation of the second charge market has been hard won, and it is up to all of us to build on that. M I

FEBRUARY 2021 MORTGAGE INTRODUCER

SPOTLIGHT

SHAWBROOK BANK Is bridging going to grow further in importance in 2021, and how can lenders rise to the challenge? Our recent Broker Barometer found that 29% expect further growth in bridging alone – we’re seeing an even split between buy-to-let (BTL) and bridging, because one feeds into the other. If you can do it with the same lender as well, with a bridge-to-term product, then it’s a good solution. Regulated bridging – traditional homeowner purchases – started to be more popular because of the stamp duty holiday and the pressure on mainstream banks which are overwhelmed with applications. Bridging has definitely provided a good solution. If you put a deadline on anything it’ll drive behaviours, but you need all stakeholders to work smartly as well. So, at Shawbrook we are committed to supporting the market, being aware of the deadlines and of the consequences of not meeting them. Each individual’s needs are different, so you need to tailor a solution and be both reactive and proactive – reactive by offering a solution, but proactive in actually getting that solution over the line. Being both a bridging and specialist lender, regardless of what size you are, you need to have tailored solutions and understand what a client’s strategy is, what their journey is. Flexible, tailored solutions are definitely key. You also need to make sure everything’s fully transparent, with no hidden surprises anywhere on the journey. Bridging has changed so much, even in the last five years. People used to ask, “why have you taken bridging, what’s the problem?”, whereas now it has become a smart tool with which investors can maximise the potential of an asset quickly. Smart investors know that rates are now at the lowest they’ve ever been in bridging, and that it’s a smart way to maximise quick funding. We saw a lot of lenders move away from certain markets at the start of the pandemic, but if you remained strong and supportive, and have a clear vision of what markets you want to serve in, then your investors will have trust and faith in you to deliver.

Think bri d Jessica Bird sits down with Gavin Seaholme, head of sales at Shawbrook Bank, to discuss market trends and the future of the business Understanding the market and what options are out there is key. My advice would be to utilise a specialist – be it a packager or a more specialist bridging broker – and to work closely with the lenders. There’s a lot of expertise in the market. At Shawbrook, we pride ourselves on having an expert field sales team, so reach out and work closely with them to make sure the client’s needs are met. Education is key – you need to make sure that you know exactly what each area does, so you’re not just throwing something up and hoping for the best. You want the plates spinning, but spinning wisely.

What should a broker know if they are undertaking their very first bridging enquiries? We know the mainstream market is tightening up, so there will be more brokers looking at specialist solutions. There’s loads of variety and options in the market, and it’s not readily available via sourcing systems and traditional routes. So, you need to have expert knowledge of what options are available, but also you’ve got to understand the client’s needs, from day one all the way through to the exit. The exit is key. A transaction can take anything from six to 18 months, during which time a lot can change.

MORTGAGE INTRODUCER FEBRUARY 2021

Gavin Seaholme

www.mortgageintroducer.com

SPOTLIGHT

SHAWBROOK BANK

i dging… Is the market going to see a rise in complex investment projects? Houses in multiple occupation (HMOs) will continue to grow, and I think change into more of a ‘co-living’ brand with professional standards. The relaxing of planning for commercial to residential conversions will obviously help as well. We see a lot of people maximising the yield and asset potential of these properties. By using bridging you can do that quickly, which therefore means you get more profitability quicker. If you’re looking for a long-term solution, it can take six to nine months, but when a bridging solution takes two or three months, all of a sudden you’ve got six months’ worth of profit coming through in either rental or asset value. Then you can look for a longer-term solution quicker, and on the basis of higher leverage and higher value. We’ve always seen a lot of HMOs in what we do – in fact, we’ve just reduced our rates. We also see a lot of conversions, refurbs, and heavy refurbs, which will continue to grow. Are face-to-face interactions, physical valuations and the like integral to bridging, or have lenders been able to find workarounds? We are in the middle of a digital transformation at Shawbrook – we started that journey pre-pandemic. We’ve always used automated valuation models (AVMs) and desktop valuations, and we used that to support the market when the lockdown happened. If you can’t value anything then the market’s going to become stagnant. Ourselves and other lenders adapted very quickly and were able to continue the funding journey, which is especially important when clients are quite heavily committed into a transaction. Technology is a massive point for us. You can automate and drive a solution through technology, and we have systems where our brokers can apply digitally and get instant decisions. However, you will still need that tailored approach to the final decision, especially in bridging, because each situation is different. What might the Brexit deal mean for the bridging market? The plaster has been ripped off, and that will create stability. People will now continue to grow their www.mortgageintroducer.com

portfolios and invest further. There will definitely be pent-up demand built up just by Brexit alone. There’s a lot of focus on overseas investors at the moment, and we don’t know the long-term impact, but overseas investors will always look at the UK market as a strong investment. For a specialist lender like us, which predominantly works with professional investors, I think the impact will be positive. Does the government see the property market as a go-to resource to recoup its losses following the pandemic? This pandemic is obviously going to create a big black hole somewhere, and it’s going to need to be filled. Over the years, the property market has been the go-to area to help plug gaps. There is a fundamental lack of property being supplied by the government, so the government needs private landlords and the private rental sector. So, to continually to look at ways of taxing them will create a problem with supply eventually, as the maths doesn’t work out for landlords. However, we are all grown up enough to know at some point all of this needs to be paid for. How can bridging lenders address potential uncertainty around exit routes in 2021? At Shawbrook we are so transparent about bridging – yes it’s a short-term solution, but we look at it as a long-term solution. We do a lot of due diligence and take a risk-based approach, looking at the client and asset in equal importance to support a funding journey. We also work closely with the broker and clients throughout the term of the loan. We don’t just lend the money and wait 12 months to see what happens, we are constantly talking, monitoring, and seeing the progress of the project. No exit is guaranteed, but with the expertise we’ve got on our team and the book we’ve lent on, which is very strong, we’re well versed in what would be a strong exit. We are expert enough to understand the pitfalls that might come with it, but also have the knowledge and the experience to help people navigate through. What’s on the horizon for Shawbrook? We want to be the go-to specialist bridging finance provider. We want to support the market. Our hashtag at the moment is #thinkbridgingthinkshawbrook. We’re going to continue investing in bridging, with product innovation and a continued investment in tech. We’ve got expert teams, from those in the field all the way through to the underwriters that work with expert brokers, and we will continue to support them. We will be innovative and market-leading in what we do. FEBRUARY 2021 MORTGAGE INTRODUCER

SPECIALIST FINANCE INTRODUCER

MARKET

The new opportunity… Brian Rubins executive chairman, Alternative Bridging

hose businesses that do not qualify for the government’s COVID-19 loans – and there are many – are out in the cold. Cancelled events and closures, businesses shuttered because of government restrictions, slower sales on the high street, and cancelled or delayed orders for manufacturers due to COVID-19 and Brexit, all drive the urgent need for additional working capital. However, high street banks have less of an appetite for supporting small to medium size (SME) borrowers. This presents an opportunity for bridging lenders, but before jumping on the bandwagon, let’s take a breath and

measure the risks. First, no one knows how long businesses will be affected by COVID-19, but it is clear that the new normal will not start until after everyone is vaccinated. Second, some businesses will bounce back quickly, but others will take longer. Assuming a 12-month lead time for the ‘new normal’ to commence, a bridging loan for one year will not solve the problem. Also, if the exit is refinance, borrowers will need to demonstrate that they have returned to profitability. It is probable that lenders will be sympathetic and look at the preCOVID trading results as well as those more recent, but a minimum period of two years will be necessary before the refinance can occur. Some of the funds will be needed immediately, to clear accrued liabilities, but a significant proportion will be to finance future overheads, and so not all

of the loan will be required on day one, and a standard bridging loan will not be suitable. Bridging lenders that can offer a reasonably priced alternative to an overdraft, with the ability to drawdown on multiple occasions and only charge interest on the balance outstanding, will best satisfy this demand. Two recent examples of such facilities advanced by Alternative Bridging Corporation include a loan of £1,600,000 for a successful catering company experiencing a downturn in trade due to COVID-19, and £500,000 working capital for a musical instruments supplier, secured by a second charge on the proprietor’s substantial country house. These are just two examples, and it is certain that this demand will grow. Working closely with those lenders with the skills and resources to satisfy it will significantly help both introducers and their clients. M I

Can the market sustain its growth? Jonathan Caplan CEO, Grosvenor Funding

espite the pandemic, the bridging market appears to be in rude health. Recent figures from the Association of Short Term Lenders (ASTL) show that applications hit their highest ever level in Q3 2020, and completions rose by more than 40%. Applications totalled £7.6bn in Q3 2020, representing an increase of 39.1% over the previous quarter and an increase of 25.7% on the same period in 2019. Completions in Q3 2020 were at £680m, which is an increase of 44.8% on Q2, although still down by 27.6% on the same period last year, reflecting the influence of the first national

lockdown on the previous quarter’s originations activity. Over the last two months, we have seen a surge in demand for short-term finance for property acquisition, up by 25% year-on-year. The stamp duty holiday and pent-up demand due to the lockdowns has resulted in a rush of property investors taking advantage of favourable market conditions. They have opted for short-term loans for quick finance, rather than use traditional high street banks, which have tightened buy-to-let (BTL) lending during the pandemic. Last year saw a surprisingly buoyant market, with property prices soaring to a six-year high as people rushed to take advantage of the stamp duty holiday and re-evaluated their living arrangements during lockdown. However, analysts are warning that a sharp drop is looming, citing the end of the stamp duty holiday and rising

MORTGAGE INTRODUCER FEBRUARY 2021

unemployment as potential triggers for a collapse in house prices. Halifax estimates an annual drop of between 2% and 5%, while the Office for Budget Responsibility is more pessimistic, predicting an 8% fall. Redundancies were rising at the fastest rate on record towards the end of 2020, and unemployment is poised to spiral in 2021. These challenging conditions could trigger a range of major issues, including an increase in repossessions, further tightening of BTL lending, and peer-to-peer lenders facing a drying up of funds as result of high-profile failures such as Lendy. However, amidst the fallout from the pandemic, short-term lending is on a strong footing, as it is required in all types of markets as investors acquire property and need a quick turnaround. Asset rich, cash poor investors always need a solid source of available funds. M I www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER INTERVIEW

DEVELOPMENT FINANCE

Development ﬁnance: The three Ts Roxana MohammadianMolina chief strategy oﬃcer, Blend Network

he late Emilio Botin, Santander Group executive chairman until his death in 2014, is one of my favourite all-time bankers. To me, his vision defined banking and made it what it is today. Botin’s speech to the 2008 Euromoney awards dinner, where Santander was named Best Global Bank, has gone down in banking folklore. He reveled in the moment, as a commercial lender from northern Spain picking up the biggest prize in banking in front of the big investment banking-dominated institutions of bigger and richer countries, especially the UK and the US. Alluding to a poem by Rudyard Kipling, the late Santander executive chairman declared: “If you don’t fully understand an instrument, don’t buy it. If you would not buy a specific product for yourself, don’t try to sell it. If you do not know your customers very well, don’t lend them any money. If you do these three things, you will be a better banker, my son.” The reason I tell this story is because we at Blend Network deeply believe in the spirit of Botin’s words, which in our case is translated into the three Ts: trust, transparency and track record. The three Ts have become part of Blend Network’s DNA, embedded in its culture and allowing it to build strong, lasting relationship with its borrowers, and to double its volume of lending both last year and the year before that.

much as you trust your spouse. Trust is key in everything we do, but more so in property when one foot wrong can mean a deal collapses and ends up costing the customer thousands of pounds or a lost deal. At Blend Network, our priority is to build relationships of trust with our borrowers to ensure their deals progress smoothly and they return to us for their future projects. A returning borrower, of which we have many, is a borrower who trusts their lender. TRANSPARENCY

Transparency is one of those things that is hard to appreciate until something goes badly wrong. How many of you have ever had to face hidden fees from a lender disguised in the small print? Or a lender that agreed to lend before unexpectedly pulling out at the last minute? Sadly, those things happen too often, because many lenders lack transparency. At Blend Network, we put transparency at the heart of everything we do. What you see is what you get, and that’s why we also like to always meet our borrowers in person. As Joseph Safra used to say, and as we also

like to remember, ‘eyes tell more than balance sheets’. TRACK RECORD

Alternative finance and peer-to-peer (P2P) property lending has gained popularity in recent years due to its flexibility, enhanced customer service and speed. However, many P2P lenders still lack enough liquidity and are unable to fund deals fast enough. Many take several days or even weeks to fund the property deals on their platforms. Nevertheless, other platforms – such as Blend Network – get the deals funded in a few minutes. For example, a £600,000 loan in December to partrefinance the conversion of a former shoe factory into 24 apartments in Northamptonshire was funded in just 102 minutes. Before that, a £445,000 loan to part-finance the conversion of a site into four four-bed houses in Norfolk was funded in 36 minutes. From a borrower’s point of view, track record is key to ensure that their deals get funded quickly and that their projects progress smoothly. In today’s fast-moving market, property developers, investors and brokers need to build relationships based on trust, transparency, and track record. Whether you are buying at auction and need to move fast to secure funding, or whether you are trying to secure an off-market development site, make sure your lenders comply with the three Ts. M I

TRUST

As a property developer, investor or broker, you need to trust your lender as www.mortgageintroducer.com

The Three Ts: Trust, transparency and track record

FEBRUARY 2021

MORTGAGE INTRODUCER

Bridging Finance From refurbishment to refinance, help your clients take advantage of investment opportunities with our award-winning specialist Bridging offering. Rates from 0.50% pcm Up to 75% LTV* Loans from £50k to £15m Terms up to 24 months No ERCs or minimum interest Heavy refurbishment options *Up to 85% LTV available on light refurbishment to fund cost of works

Get in touch today

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

THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY

Confidently Shawbrook AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS

SPECIALIST FINANCE INTRODUCER

FIBA

A view from the frontline Adam Tyler executive chairman, FIBA

he day was set and 41 representatives from the specialist property finance industry were in place, some ready to occupy their stands in the expo area, others busy looking at their notes for one of the three panel sessions. In addition, 350 delegates – the maximum allowed within the event platform – had registered and were looking forward to meeting the business development managers (BDMs) they know, thinking about the order they would meet new lenders, and getting ready to listen to those lender principals giving their views from the stage. Does this all sound familiar? It certainly was all very familiar at the time, and the view from behind the event was very much the same. However, the outside backdrop to the Annual FIBA Conference and Expo was different. Overshadowing everything was, of course, the ongoing pandemic. For once, though, the bad weather on the day didn’t mean the numbers would be down – in fact, it meant the opposite. Taking the background of the ongoing COVID-19 crisis into account, it made it even more important that the day was all about looking forward and being positive. As an industry we had worked well together during 2020, so now the time had come to consider all we had learnt from the experience. This was a time to discuss how we could all benefit as a group by working together and talking about what opportunities are out there for us all over the coming 12 months. Following this day of positivity, it was all the more important to receive good feedback that seemed to invoke this spirit. After all, we wanted to provide a platform to build on for 2021.

There was a real sense of purpose from our visitors, speakers and exhibitors alike. I know that relationships were formed, and I am sure that many follow-up calls would have resulted – all coming from a virtual event in January. WHAT NEXT FOR SPECIALIST PROPERTY FINANCE?

At the time of writing, despite our own efforts and those of many others in both the residential and commercial finance industry, we have yet to receive the reassurance that we will be stepping away from the stamp duty cliff edge. But even with this still unresolved, when you have an industry event of this type, sold out and with so many great speakers and participants, you know that we are still very well placed for the coming year. There seems to be plenty of liquidity, appetite from all sides to get the right deals done and, most of all, there is the demand for specialist property funding from the market.

There is an opportunity for our brokers over the coming months to engage with our lender community, as they in turn have become innovative in their range, a fact which is demonstrated regularly across the press and in our inboxes. It is therefore encouraging that we can see new business opportunities, that the phones are ringing and we have our lenders’ BDMs seeking out new introductions despite being in the most difficult national position any of us has ever faced. To close on a personal note, it was so pleasing once again to see how we could all come together as an industry and share a positive experience. It has given me great hope for the future to see such brilliant numbers, to hear positive thoughts from our great speakers, and to know that nearly one year on, we are all still doing business together as brokers. This has shown us all that, if there was even any doubt, there is a place for both virtual and live events in the future. M I

The time has come to consider all we have learnt

MORTGAGE INTRODUCER FEBRUARY 2021

www.mortgageintroducer.com

Mortgage Introducer would like to congratulate everyone from across the industry who joined together to support this year’s Loans Warehouse charity ﬁtness challenge in support of New Hope.

GEORGE BROCKWITZ TOM HODGES ZOE KOON CHARLEIGH WOODDESON MATT TRISTRAM RACHAEL D’ARCY

NICKY AGOMBAR FRANKIE PHILPOTT SAMUEL CARLETON BUSFIELD CLAIRE VOSS JOHN PULLEN JOSH BAYNES AHMAD TABESH BETH OBUZOR SARAH WALTERS LIZZIE FONSECA RICKY ARCHER ELLIIOTT SIMMONS VICKY O’SULLIVAN JORDAN CHANDLER CRAIG COLLINS DAMIEN DRUCE JOE MIDDLETON ASHLEY ILLSEN BRET JACKSON LOU YATES JAMIE GILLESPIE SARAH-JANE DENHAM MATTHEW ELLIOTT MAT MONTGOMERY BUSTER TOLFREE LUKE GOULD SOPHIA SANDERS JIM ROBINSON JON CALLOW JULIA MCCOLL CHRIS BURGOYNE ANDRE BARTLETT CHRIS BORWICK NIGEL LEWIS SIMON BURNELL MATT COTTLE SIMON JUNIPER CHRIS PEDLAR CHRIS TIMMS JESS LESTER TERRY BELL LAURIE DYMOCK JULIAN WELLS HARRY HODELL DAVID BINNEY RYAN FERRERA DANI FERRERA NATHAN CAFAERO LOU YATES ANDY HEY MARK CLEMENTS MEL SPENCER SEAN D’ARCY HAYLEY BELL MARK GRIMLEY MIKE WALTERS TINA WILSON JENINNE CARPENTER MARIE PEVERLEY EMMA HALL FIONA DUNGAY SARAH VANDENBREKEL PHILLIP DANESHAR SAM FERRIER MICHAEL ALDRIDGE JANA SAMASOVA ANDY SHEPPARD ANTHONY BRADLEY ELLIE GILBERT JUSTIN DUNNE CON ANDREW STACIE BUTLER JAMES LUCAS CHRISTINA DUGGAN IAIN WILLIAMS GAVIN DIAMOND DANIEL MCGILL SAM HARDING MATT MCCULLOUGH ADAM SHELDON MATTHEW STOKELL GERARD ELLIOTT HANNAH JONES CURTIS BETTS SHEILA BAILEY JAMIE JOLLY LIAM ARNOLD GRAEME WILSON MATT WHITEHALL JIGAR PATEL RUMOR DUFFY DAN WATSON TONY CORTES NIGEL HAVERS GAVIN BARCLAY MARTIN SIMS MARK ROOKYARD SIMON HOURICAN STACIE BUTLER STEVE BEARD TOM MOLLOY MATT WHITEHILL ANN-MARIA PARKINGSON CARL TOPHAM DEBBIE STAVELEY

SECURED LOANS FOR SELFEMPLOYED? Rates from3.37% Options for 1 year’s trading Up to100% LTV Pay atax bill No consentoptions 3rd chargeavailable Whatever the situation, we’ll nd a solution. We’re expertise you can trust. Get in touch today 01709 321 665 www.nortonbrokerservices.co.uk

THIS INFORMATION IS FOR INTERMEDIARIES ONLY AND SHOULD NOT BE DISTRIBUTED TO POTENTIAL BORROWERS.