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STATE OF THE NATION Learning from the past and looking to the future

 Robert Sinclair  The Outlaw: an apology  Interview: Contact State

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EDITORIAL

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

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Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com

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It’s always darkest before the dawn

A

s we put the final Mortgage introducer of 2020 to bed in December, lorry loads of the COVID-19 vaccine were racing across the country.

Not even the most optimistic amongst us thought that the first wave of vaccinations would bring down the curtain down on this crisis – but it seemed like a good start.

The pessimists would have been equally unlikely to guess what lay ahead: a new strain, record numbers of cases and deaths, and a new national lockdown.

As a monthly magazine, our commentators have to put something together that stands the test of the month of publishing. Despite changes happening daily, they have done admirably. The wish has to be that changes to the property market are kept to the minimum.

However, despite having made it through the intial changes, this sector does seem to be drawing some attention now. At the time of writing,

Labour leader Kier Starmer has called for estate agents’ viewings of properties for sale to be halted. There are also rumours from Whitehall that they could stop moves all together should infection rates not drop.

Let’s be frank here, though. How much chance of transmission comes from viewing a property (in a COVID secure manner) and moving home. I’d argue slim to none.

Maybe the government should concentrate on the supermarket shoppers crammed together flouting the rules, or the groups of people swanning around streets of the capital.

It would be ridiculous to throw the baby out with the bathwater and close down one of the few bright spots in the current economy.

A thriving property market will be essential to pulling the UK out of this crisis, and that is before we get onto the army of buyers who won’t hit the stamp duty deadline. Boris and co need to think carefully before tinkering with the property sector right now.

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MAGAZINE

WHAT’S INSIDE

Contents 7 9 14 15 16 17 18 19 20 26 31 33 36 38 39

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

18

RECRUITMENT

40 Interview: Contact State Jessica Nangle catches up with Alain Desmier from Contact State to discuss how scams are impacting the lead generation industry, and how to stay vigilant as new regulation comes into force

62

44 The Outlaw The latest from our resident outlaw

SPECIALIST FINANCE INTRODUCER

48 Cover: State of the Nation As we enter 2021, Mortgage Introducer speaks to brokers across the UK to get their take on the current issues and opportunities in the mortgage market 56 Loan Introducer The latest from the second charge market 62 Specialist Finance Introducer Development, bridging and FIBA

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44

THE OUTLAW

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REVIEW

AMI

The green deal Robert Sinclair chief executive officer, AMI

T

he Department for Business, Energy & Industrial Strategy (BEIS) is not one which readily trips off the tongue when considering where the major housing and mortgage market impacts will come from.

However, it is a driving force in the areas of artificial intelligence (AI) and promoting innovative technology in the wider financial services sector. BEIS is leading the debate, setting the agenda and promoting competition through funding to ensure the UK is at the leading edge of world developments.

This will impact our lives both in work and as consumers.

The impact of COVID-19 on the way we live and work has undoubtedly given government the confidence to push the innovation agenda quicker.

One other area where this will have huge impact is on the approach to dealing with climate change. On 27 June 2019, the UK government amended the Climate Change Act and set a legally binding target to achieve net zero greenhouse gas emissions across the UK economy by 2050.

This world-leading target will bring an end to the UK’s contribution to climate change. As a core part of that, we have the move to ban the sale of petrol and diesel-only cars by 2030.

However, this is nowhere near enough.

There is also a two-pronged attack on the housing market in England and Wales which the devolved governments will amend for their markets.

First, there is a consultation, now closed, on the private rented sector.

BEIS has proposed its preferred policy scenario for improving the energy performance of privately rented homes: all rental properties must have an energy performance certificate (EPC) rated Band C or better.

This will be a requirement for all new tenancies from 2025, and for all tenancies from 2028, requiring landlords to invest significantly in their portfolios to improve properties that mostly sit in Band E or worse. Brokers will have to work with their landlord clients to raise the required funds if government grants are insufficient.

In addition to this, BEIS is consulting on lenders having to produce regular data on the average EPC rating of their lending books. The intention is to generate league tables.

There will be a push for mortgages that allow greater lending to more energy efficient homes, which are cheaper to run, or for cheaper interest

rates to incentivise people to upgrade their property. The new benchmark will be an average lending book portfolio of EPC Band C. This means that in order to accommodate some properties that will be in lower categories, a significant number will have to be in Band B or above. Having a number of listed buildings or flats in multiple possession could create a drag in some portfolios.

We have been involved in workshops on this, and the fact is that the consultation is on the pace of change, not on whether this will occur. Indeed, early indications are that lenders will have to record a current EPC at all points where they transact. This would include purchase, remortgage and product transfer.

Although not part of current proposals, it is clear that penalties will be applied to mortgage portfolios that are less energy efficient in the not too distant future.

So, those lenders which have been heavily into new-builds in the last decade may have an advantage.

Lenders will have to consider whether they will lend on properties that have an EPC lower than C, and what requirements by way of improvements they will need to build into their mortgage offers. Another market complexity on which the good broker will be able to advise. M I

A shiny new FCA?

T

he Treasury is currently consulting on the future regulatory framewrok for financial services.

This is our ‘once in a generation’ chance to shape who regulates our industry, with a focus on their objectives and how they are managed and controlled. We have until 19 February to think through the improvements that might be needed.

At the same time, the FCA is reacting to the findings from the London Capital & Finance and Connaught reports on how it authorised and supervised these firms.

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The new chief executive Nikhil Rathi is using a transformation programme to engineer the business he wants to be running for the next five years.

This internal restructure is aimed at clearly defining the goals and outcomes the FCA seeks to deliver across the markets it oversees, and the tools it deploys in doing so.

This work will focus on how it aligns its resources and operating model to achieve these goals, and the ways it gathers, analyses and acts on intelligence, including through developing greater automation, data and

digital capabilities. AMI will very much be part of this activity.

For us, it is about better authorisation processes, slicker supervision and fewer costs being passed to the compensation scheme – a greater focus on what most firms do well, allowing competitive growth without interference from the FCA. Until it can prove it is an effective supervisor, it should severely limit its work on a domestic consumer-based competition agenda, but focus on ensuring UK financial services can be competitive world-wide.

JANUARY 2021 MORTGAGE INTRODUCER

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REVIEW

MARKET

An eye to the future Craig Calder director of mortgages, Barclays

T

he weeks leading up to Christmas usually tend to include a gradual tapering of mortgage activity and a smattering of festive get togethers.

However, as we all know, 2020 was far from ‘normal’.

Every link in the mortgage chain continued to operate at full throttle up to, and over, the festive period.

This heightened activity will undoubtedly continue, and Q1 is set for some of busiest times ever seen.

As I suggested in last month’s article, much of this is down to a healthy and resilient housing market, ably supported by a highly competitive lending arena.

Inevitably, question-marks have been raised over what might happen once the stamp duty deadline closes, and whilst there is likely to be a natural housing market lull in the following weeks, activity levels are expected to remain healthy over the course of 2021.

HOUSE PRICES

The latest house price index from e.surv outlined that average house prices across England and Wales rose by 1% between October and November 2020.

As a result, the price of the average property in England and Wales at the end of November was said to be £319,816. On an annual basis, the average price of a property increased by 5.8%.

Looking forward, there are many different views and opinions when it comes to house price expectations.

Rightmove, for example, predicts that house prices are set to rise by 4% in 2021 as housing stays high on people’s life agendas.

Rightmove also noted that Q1 will be particularly busy, highlighting the www.mortgageintroducer.com

current logjam of 650,000 properties changing hands.

In contrast, Halifax has suggested that house prices could fall by between 2% and 5% in 2021, although such a fall would only partially reverse the almost £18,000 (7.6%) increase in average prices experienced over the past 12 months.

House price predictions are notoriously difficult at the best of times.

Even though the housing market has proven robust throughout 2020, there are still many influencing factors in – both positive and negative – which could have a major impact.

With these liable to move at great speed, it continues to be prudent to expect the unexpected.

NEW PURCHASES AND REMORTGAGE OPPORTUNITIES

To further outline just how busy the housing and mortgage markets have been over the course of the year, Q2 aside, new home mortgage applications are reported to have risen by 51% between 2019 and 2020.

The research from Trussle outlined that more homeowners are moving to a new home (56%) than remortgaging their current home (44%). In contrast, 2019 saw the majority of homeowners prioritising remortgaging (63%) over new house purchases (37%).

Homeowner appetite for remortgaging started the year off strong, with applications in January up 196% month-on-month. In addition, as the UK entered its first lockdown, remortgage applications jumped 54% during March.

Trussle also noted that mortgage applications from next-time buyers surged by over 73% in June, as reports of the possible stamp duty holiday gained momentum.

As a result of strong demand, it now takes an estimated 115 days to complete on a property in England.

Furthermore, Trussle revealed that 800,000 homeowners are on standard variable rates (SVRs). These represent some interesting statistics, especially

the 800,000 homeowners sitting on SVRs. This really should make the intermediary market sit up and take note, especially when considering the low interest rate environment and just how well-priced remortgage products currently are.

Q1 will see a large focus on managing business pipelines, but the remortgage market will also continue to play a highly significant role.

AFFORDABILITY

Affordability remains a vital component to facilitate this raft of purchase and remorgage business, and positive news has also emerged on that particular front.

The latest MBT Affordability Index highlighted that the affordability gap dropped to a record low of 15% in November, having peaked in February at 21%.

However, where lenders are unable to provide the loan requested by a broker, the gap between the loan requested and the loan amount offered has widened.

In November, the average difference reached £23,185, which was the highest figure for the year – up from £22,450 in October, and a low of £15,000 in February.

Focusing on different sectors of the market, the affordability gap for first-time buyers also hit a record low of 10% in November, down from the previous record of 11% in October.

However, homemovers and remortgage customers saw the opposite trend in November, with the number of lenders unable to provide the loan amount requested increasing across both categories.

There are obviously a number of factors at play here, and while it’s great to see the affordability gap moving in the right direction, these fluctuations also demonstrate the importance of the advice process, and of intermediaries working with the right lenders to best match the ever-changing needs of their clients – factors which will be increasingly prominent in 2021. M I

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Housing options post-pandemic Craig Middleton head of mortgage sales and distribution, Harpenden Building Society

W

ith New Year’s resolutions made, many in the UK will now be looking forward to the year ahead, having firmly shut the door on 2020. Despite a particularly difficult year on a social and an economic level, those serving the mortgage industry can look to the future with optimism.

LEARNING TO ADAPT

For some in our sector it’s been a buoyant year, less so for others.

The business development team at Harpenden has never been busier, while being acutely aware of the need to continually adapt to best serve current and emerging customer needs.

Market conditions are changing like never before.

Some challenges in the market will diminish as the sector negotiates 2021, others will remain and no doubt more will be introduced – we’ll all need to constantly review our approach.

One ongoing challenge, which has been an issue for some years now, is the lack of housing stock to place mortgage business against.

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THE LEVEL OF HOUSING SHORTAGES

Household growth is one factor affecting overall housing demand and emphasising the need for more residential options.

The number of new households in England, for example, is projected to grow by 159,000 per year, based on current trends.

The backlog of existing demand for suitable, affordable accommodation is often cited as a pressure on housing supply, as is the desire for more space by households that can afford it.

There has been a range of research into the amount of new housing www.mortgageintroducer.com

needed, with estimates as high as 340,000 new homes per year. The government’s target is to supply 300,000 new homes per year by the mid-2020s.

There is geographic variation in household growth and housing need, with greater demand in London and the south of England.

retail, became increasingly unviable and is now being demolished to create a brand new, mixed shopping, leisure and residential development.

Work on the site, located right in the heart of the town, has already started with 92 one to three-bedroom apartments forming a new and integral part of the development.

With permitted development rights relaxed in recent years, thereby allowing offices, pubs and other redundant buildings to become housing, we will surely see more flexibility when it comes to a change of use for unviable retail units.

Advancing building techniques – such as ‘modular’ construction – are also making it easier for retail space to be quickly converted into residential.

GETTING BACK ON TRACK

As recent as March this year, the government announced relaxed new measures to accelerate the building and modifying of homes – welcome news for potential property owners and those of us in the mortgage industry.

The question is, what other new residential opportunities will be available post COVID-19?

NEW HOUSING OPTIONS

Adapting redundant retail units – an ever increasing feature of our high streets – could be an answer, repurposing a prime location into much needed housing.

The demise of the high street retailer was already in view, but has been massively accelerated by coronavirus.

As a result, we’re seeing a change of usage for some underutilised units, with many examples of premises becoming, or destined to become, split retail and residential dwellings, or a complete change of use to become flats.

The examples are endless, and seen in virtually every town and city – I can reel off a string of examples in Hertfordshire, where Harpenden Building Society is headquartered.

The former Debenhams store in Welwyn Garden City is one such case, and has gone through planning for partconversion to 27 flats. Could a similar outcome be seen at former British Home Stores units left vacant around the UK, or some of the department store giants now facing closure as a result of COVID-19?

Other examples go one stage further.

The former Bircherley Green Shopping Centre in Hertford, built as recently as the 1980s and wholly devoted to

THE MORTGAGE INDUSTRY’S RESPONSE

So, change is afoot. Housebuilders – once dependent on clearing brownfield sites or negotiating the complexity and controversy of a green belt planning application – may see alternative options arising.

The availability of redundant retail units, coupled with the shake-up of planning laws to trigger a homebuilding surge, provides opportunities and could kick-start housing development in ways previously unimagined in our town centres.

For all of us supporting the property market, we need to prepare and make sure we are ready to service new opportunities like this.

Future mortgage applications may look different as a new breed of property comes onto the market, but the team at Harpenden Building Society will be looking at all requests in the same individual way.

Every application, however complex, will continue to be reviewed by a personal underwriter taking a solutiondriven approach.

This and other opportunities will create a bright future for the mortgage industry beyond COVID-19 – we’re here and ready to support you. M I

JANUARY 2021

MORTGAGE INTRODUCER

11

REVIEW

MARKET

Tap into the £50m untouched home insurance pot of gold Chris Griffin managing director, Safe & Secure

F

urlough has given many people time to contemplate and reassess things. For the self-employed, however, the last year has been more about finances than furlough.

One area of financial services that has helped many advisers through the lockdown has been the pipeline of business and any renewing trail income that has continued to accrue through the pandemic.

Mortgage brokers and advisers in the UK write around 4,000 mortgages each week and, along with protection, they have the first bite of the cherry to offer home insurance to a captive audience who need to arrange a policy in conjunction with their house purchase or remortgage. Why, then, in most instances do they not end up arranging the home insurance?

Of the 4,000 mortgages written by brokers each day, usually less than 26% – approximately 950 – buildings and contents policies are written by brokers.

Therefore, three out of four (74%) brokers’ customers do not arrange their home insurance with their own mortgage broker.

We carried out a survey of 200 brokers to find out why this was the case, and the six most common responses were: 1) We just don’t have the time; 2) It’s a small ticket sale for us – the commission is just not very high when compared to the mortgage procuration fee and the protection or life commissions; 3) It’s not worth the hassle and we do not want the extra work, compliance and admin. We also don’t want to have

12

extra professional indemnity cover, compliance tests and permissions; 4) The products tend to be much cheaper online anyway; 5) There is too much risk of a claim in the future, or upsetting the customer; 6) Having spent two or three hours with the client, helping and advising on the correct mortgage and different levels of protection, another 20 to 25 minutes working through the home insurance choices and forms is just not appealing, only to earn another £50 to £70 in the process.

The result of this is that most customers end up either going with their mortgage provider or lender, or going online and completing the forms themselves with an online home insurance provider.

Brokers who do not arrange home insurance put themselves and their future income at risk.

Ultimately, the online supplier of home insurance is likely to offer a crosssell product: life assurance, mortgage, pet insurance, car insurance. There is therefore a risk of losing the customer completely in the future.

In addition, there is no build up of

ongoing renewal or trail income for the future, so the broker is always reliant on new sales for income, and has no safety net or ongoing future income.

If this trend was reversed, and 75% of home insurance was written by the mortgage brokers or advisers, another 2,000 policies a day would be written, giving another £50m in commission in just the first year.

This would then build up year after year, with £100m in the second year with 80% renewal.

There is an easy alternative for brokers, whereby they could write the mortgage and protection and then introduce or refer the home insurance over to specialist broker – like Safe & Secure – which they can trust and work closely with.

This could complement the advice they give and protect their business in the future from the cross-sell opportunity left with the online aggregator sites.

In these strange times we find ourselves in, maybe it is time to try an alternative approach and build an income you can keep, to give you a share of that pot of gold. M I

Mortgage brokers have first bite of the home insurance cherry

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LONDON

Starting where we left off Robin Johnson Xxxxxxxxxx managing director, Kinleigh, Folkard and Hayward xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Professional Services

N

ormally in my January column for this magazine, I would probably make some attempt to predict the year ahead. As I write this year’s opener, I dare not be so foolhardy.

2020 has been a year characterised by its unpredictability; I rather think that 2021 will be just as full of surprises.

While I’m not planning to throw out any actual numbers on where I think housing transactions or mortgage lending is likely to end up this year, it is nevertheless possible to take stock of where we are today. There are also some enduring trends affecting the property market in the UK – pandemic or no pandemic.

As I write this, we are counting down the days to the Christmas break, still none the wiser about whether we will be able to spend it with our nearest and dearest. But the uncertainty that is now endemic in our social lives – how many Christmas lunches did you have to cancel at the last minute? – is not showing up in the housing market figures as the year draws to a close.

After virtually zero activity in Q2 2020, the second half of the year saw the housing market in a mad dash to catch up with the pent-up demand that deep freeze created. Spurred on by the stamp duty holiday announced in July and, at the time of writing, due to close on 31 March 2021, both residential and buy-to-let purchases were much stronger than they might have been.

However, social distancing measures and the persistence of staff working from home has put immense pressure on a system that was already struggling with processing valuations and conveyancing. By all accounts, we are seeing transactions take longer to push through to completion, prompting the Building Societies Association (BSA),

14

among others, to call on the Treasury to extend the tax reprieve at least for those whose mortgage is approved by 31 March.

We’re of the view that Q1 will be just as busy as the previous two quarters – possibly more so, if government opts not to extend the stamp duty holiday further into the year.

LOOMING QUESTIONS

How the rest of 2021 pans out depends heavily on a whole range of variables.

How fast will the vaccine be rolled out?

Will companies send staff back into offices? Will the daily commute be a thing of the past, or are people starved of the social interaction gained from working together in a physical space?

What will happen to rail fares? Fewer travellers means fewer journeys, a fall in revenue and potentially the prospect of ticket prices rising significantly.

There is also the looming prospect of unemployment. Office for National Statistics (ONS) figures showed the quarterly rise in redundancies in October 2020 was the highest on record. Whether people get back into work, and how fast, will affect the housing market in a number of ways.

Experts disagree about the effect on London property. 2020 was dominated by talk of wealthy homeowners and middle income families quitting the capital for life in the countryside. Yes, interest piqued, but I am not convinced that translated into actual cash commitment. There will undoubtedly be those for whom the pandemic and its consequent work-life balance shifts will precipitate a move outside of London.

However, there will also be those desperate for the buzz of social life and contact the city offers.

It’s worth distinguishing between the owner-occupier market and the lettings sector here, too. Job losses have predominantly been in the hospitality and entertainment sectors. Higher paid service industry jobs lend themselves to remote working well. As a result, there are those speculating that the harder

MORTGAGE INTRODUCER JANUARY 2021

hit of the two will be the rented sector, where tenants will struggle to make rental payments, causing a knock-on for landlords.

Owner-occupied homes, if anything, look set for a flurry of activity as families and professionals relocate and adjust their living preferences to fit with a post-pandemic future.

Further up the price scale, investment dynamics also support a reasonably strong outlook. Equities are very expensive, while bond yields are back on the floor after a brief widening when the pandemic first hit the West.

Oil prices have been under serious pressure for the past year, though in late 2020 OPEC confirmed a rise in distribution.

Prime London property has long been considered a safe haven for international money; the pandemic has not altered that fact. M I

Prime London property market ● New instructions in November rose 55% compared to the same month a year ago, and currently stand 23% higher than the five-year average. ● The top end of the market has held up well, with sales above £5m 9.8% higher in the three months to November, compared with the same period a year ago. This is in contrast to falls of more than 8% below £2m. ● The number of properties going under offer increased for the fifth consecutive month, with a 17% annual rise. ● Achieved prices in the three months to November rose 0.9% compared with the same period in 2019. Houses continue to outperform flats, with a 6.7% increase for houses compared with a 1.4% fall for flats.

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GREEN MORTGAGES

Putting the E into ESG Tim Hague managing partner, Sagis

I

n a classic ‘clear the decks’ move at the end of last year, the government published its long overdue energy white-paper. It outlined in a little more detail – though still not comprehensive – how it plans to deliver against its ambitious net zero carbon emissions targets.

England, Wales and Northern Ireland are committed to be net zero by 2050. Scotland plans to get there by 2045, largely because it’s further along the road already.

Experts across the energy, infrastructure, transport, housing and construction industries all agree that drastic action is needed extremely quickly if these deadlines are going to be met.

Setting the objective is always the first step – you need to know where you’re going before you decide how to get there, and while having tighter deadlines is designed to drive swifter action – jam tomorrow never motivated anyone when jam today was also on offer – it really is getting uncomfortably close to the line now.

So, what does this all actually mean for those of us in the mortgage market? Is this about making our own businesses green? Should we print less, switch to renewable energy suppliers and encourage staff to work from home to cut down on their commuting? or instead, does it mean providing greener products that incentivise behaviour change from our customers? Or is it both? And how do we actually do it?

Some lenders – predominantly building societies – are already asking these questions. Following a great deal of work done with the Green Finance Institute in 2019 and 2020, several ‘green mortgages’ launched last year.

Ecology Building Society has long promoted ‘green’ credentials and www.mortgageintroducer.com

backed self-builders keen to improve the carbon footprint of their homes.

Saffron joined the party last summer with a ‘retro-fit’ mortgage with financial incentives attached for borrowers who could demonstrate home improvements had given them a better Energy Performace Certificate (EPC) grade.

Barclays built in a green bias to its pricing, offering lower mortgage rates if the property has an energy efficiency rating of 81 or above, or is in energy efficiency bands A or B. Nationwide is offering existing a further advance which rewards customers with a lower initial rate if at least 50% is spent on energy efficient home improvements. It has also set aside £1bn to lend to those buying new-builds with A-rated EPCs.

“While lending may appear at face value a simple business, I see a huge opportunity for lenders and brokers who understand how the ‘E’ in ESG can play a fundamental part in their propositions and purpose” Newbury Building Society’s Go Green Further Advance rewards existing borrowers who want to take additional borrowing to fund energy efficient home improvements with a lower interest rate.

Monmouthshire, meanwhile, is currently running a research project with the Royal Institution of Chartered Surveyors (RICS), Rightmove and zero carbon homebuilder and sustainable energy service provider Sero, to design the first mortgage offered in the UK that recognises home energy efficiency in its affordability calculations.

Most of these offerings attempt to reward customers financially for being environmentally conscientious – a

financial play that markets well to an increasingly climate-engaged public.

Research from E.ON published in September last year found that 89% of prospective homeowners are now more interested in finding sustainable homes, while 80% said they would choose solar panels and efficient boilers over having a garden.

Nevertheless, it is still early days, and one gets the sense that branding mortgages as green is just the first step in a much longer journey.

Currently, lenders are considering the social and ethical advantages of a greener public image.

However, there is also credit risk embedded here: what lender wants to be saddled with a back book of loans secured on homes pumping out carbon which could be subject to rising carbon taxes at some point in the future? There is already an affordability issue.

Putting insulation into a loft is one thing, but where does addressing the risk represented by the thousands of homes built onto flood plains in Britain come in the green lending agenda?

What happens when these flood plains get bigger, and when flooding lasts longer?

These are environmental questions, traditionally left at the door of insurers – however, already insurers’ appetites to cover climate-related risk is waning.

Big change is needed in the UK to make its housing stock fit for this future, and much bigger thinking is required to meet and make that change.

Technology in terms of both build and financing will play an integral part in delivering that change.

While lending may appear at face value to be a simple business, I see a huge opportunity for lenders and brokers who understand how the ‘E’ in environmental, social and coroporate governance (ESG) can play a fundamental part in their propositions and purpose.

I’ve already said we can’t go back to how we were, and this is another example of how propositions must evolve to meet a new era of lending. M I

JANUARY 2021 MORTGAGE INTRODUCER

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REVIEW

NETWORKS

Seeking common ground Shaun Almond managing director, HL Partnership

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s a network specialising in mortgages and protection, we are keen to attract adviser firms to the HLP banner.

It is gratifying that while 2020 has been a challenging year, despite the worst that the pandemic has thrown at the industry, HLP has had a good year considering the number of new customers our members have been able to give advice to, and new firms who have chosen to join us.

STREAMLINED

However, the process for an advice firm to change its regulatory status by moving from one network to another or from directly authorised (DA) to appointed representative (AR) can be time consuming, and is not a decision made lightly.

One of my Christmas wishes was to make the system more streamlined and less bureaucratic. I realise that

simplification carries with it the possibility, no matter how small, that mistakes could be made. The primary purpose behind regulation is always to ensure that the customer is protected.

In this case, when a firm moves from

“The process for an advice firm to change its regulatory status by moving from one network to another, or from DA to AR, can be time consuming, and is not a decision made lightly” one network to another, or from DA status to AR, with the network having done its own satisfactory due diligence, the principal concern is to make sure that its pipeline customers continue to be serviced properly during this period of change.

For a firm with a strong business pipeline, this can be a challenging time.

Lenders identify introducers by their Financial Conduct Authority (FCA) number, and once that is suspended, it can lead to communication issues with

regulatory ownership, and therefore the advice responsibility for the customer can be up in the air.

RESOURCES

Obviously networks have a vested interest in making it as easy as possible for new ARs and, like football clubs working in the transfer market, it would be unusual if an AR moving from one network to another suffered any deliberate roadblocks on either side. It is in everybody’s interests to facilitate transfers, but for lenders who are caught in the middle, it means diverting resources to ensure the right transition, a job made more difficult by the current purchase bubble and the effect of COVID-19 on working patterns and available personnel.

SIMPLIFICATION

There are no simple answers, but it is surely not impossible for networks, lenders and regulators to establish a simpler process, common to all, which would allow a homogenous approach to what fundamentally is an administration task.

It would do much to simplify the process of transfer. M I

Let’s not get complacent

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ver since the FCA announced its intention to seek feedback on relaxing the rules around execution-only, the industry has been waiting for a definitive confirmation to begin the movement away from advice.

Certainly there are no shortage of players, especially in the online world, lining up to take advantage of any change. It would also seem that some businesses have decided to make their move, while remaining within the existing rules by providing an option for consumers who wish to have advice.

In the interests of balance, and despite what we know from pre-Credit Crunch time, I can see an argument where consumers decide that they have faith enough in the process to accept whatever an online service might serve up.

On the face of it, those individuals have accepted responsibility for their own decision, which I both applaud and worry about. The fact remains that the UK populace has been weaned on a diet of having someone, or some business, held ultimately responsible if the service agreed upon does not in fact meet the consumer’s needs.

The whole of consumer regulation has been built around ensuring advisers are responsible for their recommendations, which is absolutely right in principle.

The flaw in the plan is that consumers have been effectively infantilised by the removal of any personal responsibility, and almost two generations have been brought up in the belief that there is someone else to blame if the outcome is not what they

expected. Who will they blame when there was no advice?

Alarmingly, a recent poll heard from consumers that over 50% of them preferred to go direct when seeking a mortgage rather than see an adviser. Interestingly, a third of advisers polled believed that a majority of consumers would seek advice. Something there for all of us to consider.

Perception is a powerful force, and we need to make sure we do not become complacent about the position of advice in the sector. Regardless of whether the rules on execution-only are more formally relaxed, it is up to all of us to ensure we hammer home the advantages of advice at every opportunity, or risk losing customers who see the internet as the fount of all wisdom.

MI

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REVIEW

TECHNOLOGY

The long-term effects of social distancing Peter Izard business development manager, Investec Private Bank

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s businesses and society adapt to the new normal brought about by COVID-19, we’re seeing enormous levels of innovation and adaptation, with many businesses completely transforming their operating models in order to keep pace.

This is certainly true of the property sector, which halfway through May started to come out of a so-called ‘deep freeze’ following weeks of being unable to conduct valuations, viewings and other aspects of the process.

In line with a gradual easing of lockdown restrictions, we’ve begun to see measures to get the market slowly moving again. Yet despite this, there will be a number of long-term effects on how the sector operates, and how that shapes the home buying process, that are here to stay – at least for the foreseeable future.

THE RISE OF VIRTUAL VIEWINGS

It is no surprise to see online shopping figures surge under lockdown, and the property market is no exception.

Using a property aggregator platform to search online has become commonplace in recent years through sites such as Zoopla and Rightmove, but until now viewings have typically been conducted face-to-face.

However, with in-person viewings suspended across the board during lockdown, we have seen many agents turn to digital technology in order to offer alternatives.

Digital works in a few different ways. Rightmove, for instance, has introduced an ‘online viewing’ label, allowing agents to promote homes www.mortgageintroducer.com

that come with pre-recorded video tours. Other agents favour real-time video tours, which can be conducted ‘live’, and which can thus be more interactive, offering the chance for questions along the way.

There are also pieces of software available, such as EyeSpy360 which allows agents to create 360-degree virtual walk-throughs and models of properties, for potential buyers to view from wherever they are in the world.

While these are not ‘new’ technologies per se, it’s fair to say that they previously existed on the periphery of agents’ offerings. Now – and for some time to come – they find themselves quickly accelerated frontand-centre.

FROM OFFER TO COMPLETION

Beyond viewings, there are further phases of the homebuying journey which can benefit from technological solutions. In particular, tasks including property surveys, contract exchange and conveyancing each require a great deal of paperwork and, as such, can become a painfully protracted part of the process.

With the pandemic forcing businesses to reassess every stage of their operating model in pursuit of efficiencies and opportunities to streamline, these are analogue systems which have great scope to be automated, freeing up experts to focus on more pressing issues.

Thirdfort is an example of a service which draws on data analytics, facial recognition and document scanning technology to prove the legitimacy of funds and eliminate physical documents from the mix.

HUMAN TOUCH

This is not to say that human input will become obsolete. Buying a home is not the type of purchase you make every day, and the importance of

expert, human reassurance is not going anywhere soon.

Instead, we should look to machines to take on mundane administrative tasks, freeing up experts to spend more time providing insight and customised service at the points in the journey which are reliant on relationships.

Mortgage broking is one such area that tends to require specific expertise, tailored solutions and regular human contact – particularly for buyers with more complex income structures.

BEYOND THE CRISIS

Considered in the context of the crisis, it’s easy to view the adoption of these types of technology as being done through necessity. But they will remain relevant beyond the outbreak.

Prior to COVID-19, the residential property sector had remained relatively unchanged for quite some time.

There has been huge scope for the introduction of technology to key points in the homebuying journey, which can benefit from the added flexibility, accessibility and ease that comes with digitisation.

When it comes to viewings, for example, travelling to view multiple properties in various locations can be tiring, time-consuming and logistically challenging, with potential buyers beholden to estate opening hours, and the many other commitments that filled our schedules before COVID-19. This could well be relegated to the past.

Though COVID-19 may have catalysed the shifts we are seeing today, there is no reason why some of the changes it necessitates shouldn’t be here to stay.

At Investec Private Bank, we refer to the start of every homebuying journey as a ‘blank sheet of paper’. No buyer’s requirements are the same as another’s, after all. We are now at a time when the entire sector is, collectively, facing a blank sheet of paper. It is an opportunity to look afresh at how we do things.

My belief is that, if harnessed with sensitivity, digital solutions are not just a temporary solution to operating during the pandemic – these are innovative measures which can improve the process in the long term, too. M I JANUARY 2021 MORTGAGE INTRODUCER

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REVIEW

RECRUITMENT

An introduction to introductions Pete Gwilliam Xxxxxxxxxx director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Virtus Search

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hether you are applying for jobs or speculatively introducing yourself to an employer that interests you, a cover letter can be the determining factor in whether you get a positive response.

Communication and influencing skills, intelligence, and enthusiasm for being valuable and contributing to success are all elements that a cover letter can express in a way that a CV cannot.

A cover letter should go beyond your basic work history to highlight how you have performed in your career and why you are interested in the business.

Consider an introductory letter to be how you might explain to a colleague why you are excited about a firm or job, and importantly – in a conversational tone – why you think you’d be successful there.

It is not about simply asserting that you’d be great at the job, or proclaiming that you’re a great communicator, but more about demonstrating where your accomplishments and experiences show your qualities. The more compelling and interesting this is, the better, and it is certainly worth avoiding selfproclamations such as, “I’m the best candidate for this job.”

A letter allows anything unusual or confusing about your candidacy to be addressed, and is the chance to provide context for things that otherwise might seem confusing – or less than ideal – to a hiring manager.

For example, if you are overqualified for the position but are excited about it anyway, or if you’re a bit underqualified but still think you could excel at the job, address that up front.

Or if all of your experience is in a different field but you’re actively

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working to move into this one, talk about why – and explain how your experience will translate.

If you don’t provide that kind of context, you allow the reader to draw their own conclusions.

For example, if you are overqualified for the position, make a point of acknowledging it and explaining why you’re interested in the job, why you have taken the decision to take a ‘step back’, and how your additional experience could prove invaluable.

If you are currently living in a different part of the country from where the position is located, confirming that you are moving to the area and that you view them as an employer of choice is likely to minimise any issues with location.

If all your experience is in a different part of the industry, but you are actively working to transition into an alternative area, explain why that is your plan and what steps you have taken to begin such a transition.

Whether through training, job shadowing, or via the pursuit of qualifications – or ideally from a combination of all of these – it is important to be clear that you are proactively invested in the transition and are not simply talking about the prospect of it.

If hiring managers have too many unanswered questions about your candidacy, it is sometimes easier just to move on to a different candidate.

Addressing any likely concerns right up front in your cover letter will allow you to be evaluated on your merits, and not just assessed based on a set of circumstances that might be read without any context.

There is no doubt that a good cover letter should be personalised to the firm and the job in question. If the firm has stated corporate values, this will give you a good indication of the type of culture. Clearly, an introductory letter allows you to suggest why you think you would be a good cultural fit.

If you understand what a business cares about, it is important to show how that overlaps with your own career experience and values.

Likewise, conveying respect for the company, its brand and the employees that you know helps make your interest in a role very authentic.

Ultimately, the essence of any introductory message is to show that you believe becoming a part of the company is potentially a good move and a good fit. In support of that assertion, you must clearly indicate why you think they should have an interest in you. M I

A good cover letter should demonstrate accomplishments and show your qualities

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SERVICE

2021 and the challenges ahead Stuart Miller customer director, Newcastle Building Society

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he world has been through one of the worst crises of this century, and is now beginning to pick up the pieces and rebuild itself both socially and economically.

One thing is sure: we will not be going back to things as they used to be.

As COVID-19 took its economic and emotional toll on the world, the mortgage value chain of lenders, networks and brokers has faced significant challenges and grappled with market uncertainties.

Importantly, how we continue to find ways to connect with and support our borrowers, customers and intermediary partners is a critical part of that.

The pandemic has asked new questions of us all, and is demanding new skills and approaches to support partners at the frontline, as well as those confined to their homes.

Some impacts can be more easily mitigated or controlled, but others will require us to find new and innovative solutions. From furlough earnings to mortgage deferrals, to new demands on capital and infrastructure, all lenders have had to adjust their traditional view of the world and begin to understand how they will engage with a changed landscape post-pandemic. This is true for intermediaries, too.

The pandemic is also making us reconsider how we help people own their own homes, since both generational attitudes to ownership and employment patterns for young and old have changed markedly during the last nine months.

Manual underwriting has never been more important, but other processes, www.mortgageintroducer.com

which might previously have taken years to reform, have evolved overnight to support the new ways of working and living.

The government has done much to support both the employed and selfemployed population, but we know that these schemes may end in March.

Less predictable is the outcome of the stamp duty holiday.

At the time of writing, it has already been reported in some of the national press that Treasury officials are poised to advise the Chancellor to extend the deadline so as to avoid the collapse of thousands of housing transactions.

Many applicants are currently progressing on the basis that no stamp duty will be payable, but already many in the industry are pointing out that transactions are taking much longer to complete, and that tens of thousands could miss the 31 March deadline as a result.

If purchases are delayed beyond this date and miss the stamp duty holiday, borrowers might find themselves having to source additional funds to

The pandemic has asked new questions of us all

cover the stamp duty costs, or instead secure a reduction in purchase price. If neither option is viable, then the impact on the market could be catastrophic, with the risk of a significant number of transactions collapsing.

It’s not hard to see the size of the problem. Extending the stamp duty holiday is crucial if we are to successfully manage the massive number of homes that are set to exchange and complete over the coming months.

As I write in early December, Bank of England figures have shown a surge in the number of mortgages approved in October, up 5.9% on the previous month to 97,532, and a massive 51% ahead of the same period last year.

If, as is typically the case, transaction numbers follow mortgage approvals by between three and five months, then some commentators are suggesting that the actual number of transactions may be closer to 120,000, making some sort of an extension sensible.

It’s at times like this that lenders, and in particular building societies, remain steadfast in their purpose.

Societies inherently understand why they exist and who they are built to serve, from their colleagues to their customers and the communities in which they live and work.

Looking back, before the Global Financial Crisis, some parts of financial services were actually referred to as being ‘masters of the universe’. The crisis itself, and latterly the COVID-19 pandemic, have shown that is not in fact the case.

We are inextricably woven into the fabric of society, and society’s verdict will be based on how we fulfil our obligations and purpose.

Brokers are an inextricable part of that, too. In a complex market with many moving parts, good advice is more important than ever before. It’s why the mortgage market relies so much on brokers.

While we still grapple with issues we may or may not be able to fully control, it is so important that none of us lose sight of our core purpose: to support, with your help, customers who want to buy and finance their own home. M I JANUARY 2021 MORTGAGE INTRODUCER

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REVIEW

BUY-TO-LET

Broader solutions for challenging times George Gee commercial director, Foundation Home Loans

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uffice it to say, 2020 was a year which tested every single business across all sectors to the absolute max.

The mortgage market was firing on all cylinders as we entered the new year, only to then hit the COVID-19 buffers in Q2. The response to the ‘reopening’ of the housing market, especially from a specialist lending perspective, has been incredible.

To see so much business written over the second half of the year is testament to the strength of the appetites shown by homeowners, landlords, developers and investors. This has been ably supported by an adaptable and innovative lending community and the hard work, expertise and commitment demonstrated by intermediaries, even in the most trying of times.

Just how the buy-to-let (BTL) sector bounced back can be summed up in recent data collected by Hamptons, which showed that landlords made up 15% of all sales agreed in November – the highest figure for four years.

Investors were said to have bought around 134,000 homes in 2020, up from 133,000 in 2019.

The average price paid for a home by a landlord in November was £180,000, which is around £80,000 less than that paid by an owner-occupier.

The research also showed that a record 51% of the purchases were in cash, and that investors will pay £365m in stamp duty on the sales agreed over the last three months, a figure which could rise by 20% – or £74m – if they do not complete by the end of March.

In contrast to the talk at the start of the year – which suggested

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that landlord purchases would fall significantly – this data demonstrates just how quickly things can change, and the continued importance attached to the private rented sector.

Of course, in a similar vein to homeowner activity, this uplift in BTL purchases is largely down to the stamp duty changes which tipped the whole balance of the purchase market. Like many specialist lenders, we received record-breaking levels of business throughout the late summer and autumn months.

This meant bringing people back from furlough quickly, recruiting new staff and redeploying existing parts of the team to provide advisers and their clients with the best chance of completing before March’s stamp duty deadline, and with a view to managing increased levels of business in 2021.

Looking forward, Q1 will be make or break for a variety of property transactions, and this represents yet another highly pressurised and challenging time for every link in the mortgage chain.

It’s nigh on impossible for lenders to guarantee that all existing cases will complete before the end of March next year. However, what lenders can do

Refining processes will be essential in 2021

MORTGAGE INTRODUCER JANUARY 2021

is simplify processes, alleviate pressure by accepting supportive options such as no-search indemnity insurance, and actively reorganise resources where possible so as to combat logjams in these pipelines.

Communication is also a key element; keeping advisers up to date with service levels and lead-in times, as well as effectively communicating lending requirements, will help give each and every case the absolute best chance of beating the deadline.

From a Foundation Home Loans perspective, we have already doubled the rate of offers issued as a result of the recent changes made, and our aim is to continue hitting this target.

There will be an additional focus on completions during January 2021, with a major focus on releasing three times our normal level of funds throughout February and March.

Establishing these enhanced processes also bodes well for the intermediary market in 2021, as increased efficiency across the board will enable a variety of cases to reach underwriters in a more effective and timely manner.

At the same time as working on existing pipelines, lenders also have to ensure that they stay focused on new loan origination.

Thankfully, an array of available remortgage offerings across the residential and BTL markets should provide advisers with plenty of competitive product solutions to build a sustainable flow of business into Q2.

Looking further forward, I expect all lenders to continue reviewing and refining their front to back-end process, and working even more closely with intermediary partners to ensure that all supporting information for applications is as accurate as possible and collated for the lender in question.

2021 is a year where all lenders and intermediary firms should be striving for increased efficiency.

For intermediaries, working hand in hand with specialist lenders will certainly help ensure that more clients have access to a broader range of solutions which will meet their everchanging needs, in what remains an uncertain economic environment. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

A time for looking forward Xxxxxxxxxx Bob Young xxxxxxxxxxxxxxxx, chief executive officer, xxxxxxxxxxxxxxxx Fleet Mortgages

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irst, let me wish all readers of Mortgage Introducer a very Happy New Year. With it comes the sincere wish that whatever we might have to face over the next 12 months, it is distinctly less eventful than that which was forced upon us all in 2020.

However, that is said in the full knowledge that – given the times we currently live in – it may be wishful thinking on my part. What I do hope, however, is that before the year is out we have a fully vaccinated UK population, and we are some way down the road to more ‘normal’ times.

But here we are, in the early throes of a year. I suspect that, even a couple of weeks in, you have perhaps seen just what awaits you as advisers, if not for the full year, then certainly until we hit the 31 March stamp duty deadline.

Stamp duty is, of course, a concept which you suspect would have to be made up, if it did not exist, just so the political powers had a significant lever to pull in order to influence the housing market, and so we housing stakeholders had something to talk about as a key influencer on our lives and that of our customers and clients.

There’s no doubting the influence stamp duty has in persuading potential sellers and purchasers to act in the housing market. Last year’s stamp duty holiday was different, in that it was open to second homeowners and therefore landlords, who quite frankly have not been afforded such largesse in recent memory.

Now, however, the window is closing, and while landlords where possible have brought forward www.mortgageintroducer.com

purchases in order to try and secure some stamp duty savings, I suspect they will have realised some time ago that without an extension the chances of completion are slipping away. With house prices as they are, it might actually be preferable to wait and see how the market reacts.

That does not mean there won’t be landlords looking to add to portfolios, and there is a significant remortgage market to be accessed as well. However, it means that landlords are likely to be rather cautious about buying at what they might see as the top of the market. T’was ever thus.

Stamp duty, however, seems to be in perpetual motion. Just as I began writing this, the news came through that the Welsh government had introduced changes to stamp duty charges with pretty much immediate effect. Once again it was second home owners, the majority of whom would likely be landlords, who were in the firing line.

From 22 December, for all those whose transactions which had not exchanged up until that point, second home owners would be charged an extra 1% for additional property purchases, meaning a rise from 3% to 4%. This is of course in a sliding scale, topping out at 16% for those purchasing property over £1.6m.

Welsh landlords will already be aware they didn’t even get access to a stamp duty holiday like the rest of the UK, so this is another increased cost. The private rental sector (PRS) is clearly being targeted by the Welsh government, with the goal that the money raised – expected to be £13m – will be invested in social housing.

The increase adds a significant further cost to Welsh landlords, and it puts Wales on a par with Scotland at the 4% additional surcharge starting point – although there is currently a holiday for landlords in Scotland.

Both England and Northern Ireland are at 3% surcharge, but one wonders whether government might feel under some pressure to even up once 31 March has been and passed. I hope not.

At the time of writing, while the industry has been calling for an extension, it looks unlikely that one will be forthcoming – although stranger things have happened. I would certainly suggest that coinciding the holiday end with an increase in the surcharge would be unpalatable.

There is still evidence to suggest that cuts to stamp duty actually deliver more thank increases, in terms of tax receipts plus economic growth. Recent estimates from the Centre for Economics and Business Research (Cebr) suggested a stamp duty cut could lead to 37,000 additional property transactions, while a permanent holiday at current levels could generate £136m more for the Treasury because of “higher consumption and increased housing market activity.”

It has been one of the sorest of points in recent times that when it comes to political interference and stamp duty levels, less is actually more. When you take an economy that is very reliant on housing market activity, it actually makes sense to support greater numbers of transactions, not put obstacles in their path.

We can see this no better than in the PRS, where too many measures designed to move private rental properties to owner-occupier status have simply eaten into the number of transactions right across the board.

Blaming landlords for there being lower levels of first-time buyers has been a fool’s errand, and we actually needed measures – including stamp duty stimulus – which aim towards increasing activity, not subduing it.

This measure in Wales is, of course, the opposite of that. However, we should note that in other parts of the country there is a far greater ability to look forward and to see the full benefits of a stimulated housing market for the wider economy, not just in terms of a short-term hit to landlords’ pockets which delivers very little in the greater scheme of things. M I JANUARY 2021 MORTGAGE INTRODUCER

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BUY-TO-LET

What an opportunity for positive change Jane Simpson managing director, TBMC

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hat a year, and what a challenge, in 2020; it’s hard to put into words exactly what the impact of the coronavirus pandemic has been on our lives over the last 12 months.

It has certainly brought a lot of change to our working lives, and perhaps forced businesses to reassess some of the assumptions about best practices, or develop new strategies for continuing to work effectively in a different set of circumstances.

From the perspective of a specialist in the buy-to-let mortgage market, the last year has highlighted the benefits to be gained by focusing on our technical capabilities and how improvements to our online processes can provide a more efficient service to customers. It also made us rethink our approach to teamworking within the business.

To start with, everyone at TBMC was immediately asked to work from home at the beginning of the first lockdown in March. This was arranged remarkably quickly and without fuss, especially considering we have always been an office-based business. It meant that we all became remote workers and online conferencing took on a life of its own, with Microsoft Teams becoming our channel of choice.

Although this has required staff to adapt, it has also taught us new ways of communicating and allowed a more flexible approach, especially for those who have young children at home needing supervision during these unusual times.

Throughout the buy-to-let mortgage sector, we have seen an increase in the use of digital communications

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to maintain relationships between lenders, brokers and clients, which has highlighted the need for service providers to keep improving their online capabilities to meet the changing demands of customers.

In general, the demand for buy-to-let finance has remained high throughout the pandemic, and once the housing market reopened after the initial shutdown, there has been a surge in buy-to-let mortgage business spurred on by the stamp duty holiday.

Buy-to-let continues to be a viable investment opportunity, especially in a financial environment offering such low interest rates on savings.

LIMITED COMPANIES

During 2020, the continuing interest in limited company buy-to-let was apparent, with a significant proportion of applications at TBMC being via a corporate entity. This is unsurprising, given that buy-to-let mortgage interest tax relief was finally phased out in April 2020, and the high demand for limited company finance is likely to continue in 2021.

Coronavirus also brought an unexpected boon for the holiday let sector, as more people opted for UK staycations and the demand soared for properties in popular resorts and other desirable locations.

This has led to a wider range of products for investors to choose from, as lenders have developed their propositions to service this niche.

It looks as though the uncertainty brought about by COVID-19 in 2020 is likely to continue during the early part of 2021, and those working in the mortgage industry will have to remain flexible and open to change as we wait for situation to play out.

However, there will be plenty of proactive ways to face the unknown challenges ahead, and sometimes unprecedented change can bring unexpected opportunities.

At TBMC, our main priority is maintaining good communications with our providers, partners and customers, and harnessing technology to deliver a better service.

We have also developed greater understanding of the challenges facing our clients, becoming better at empathising and looking for creative solutions to individual customer needs.

There is no doubt that 2021 will be another interesting year in the buyto-let sector, and one that provides us with the opportunity to affect change for the better. M I

Unprecedented change can bring unexpected opportunities

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BUY-TO-LET

The value of buy-to-let Richard Rowntree managing director mortgages, Paragon Bank

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espite the pandemic’s emergence in 2019, it is 2020 that will go down in history as the year changed by coronavirus.

I’m sure that we will talk about pre and post-COVID in a similar way to how we reference the financial crisis, but the lasting changes will be even greater. The impact on society was previously unimaginable, and focusing on the property market, it will likely shape preferences for generations.

CHANGING DEMANDS

We have read a lot about the demand pent up by lockdown, but there is also evidence to suggest that it goes further back. Analysis carried out by Zoopla back in 2019 showed that we remain in a property for an average of 21 years.

This increased to around 30 in areas of London and the South East where the higher property prices meant stamp duty was more of a barrier compared to elsewhere in the UK. These findings supported a 2017 report by the Council of Mortgage Lenders which looked at factors for a steep decline in homemoving over the previous three decades.

The authors highlighted stagnation among rates of mortgaged movers, and government policies that were primarily focused on stimulating the first-time buyer market.

The introduction of the Help to Buy scheme has seen a rise in the number of first-time buyers, who accounted for 81% of the 263,297 properties purchased with an equity loan between 1 April 2013 and 31 December 2019.

Aided by the ‘bank of mum and dad’, first-time buyers have bought larger and more expensive homes, reducing the need to move from starter homes. The consequence is that www.mortgageintroducer.com

mortgaged homeowners have become progressively older and have a lower propensity to move as a result.

At least in the short-term, the pandemic seems to have changed this, providing a once in a generation opportunity to reassess what we want and need in a home.

Research has highlighted some shifting priorities that can be directly linked to COVID-19, with things like gardens and space for home offices becoming more desirable to movers.

Where our homes are located has always been important, but we must also ask if the pandemic will cause any changes in where we choose to live.

COMMUTER PATTERNS

An Office for National Statistics (ONS) comparison of census data and the findings of the Business Impact of Coronavirus Survey unsurprisingly confirmed the expectation that the pandemic would lead to major changes in commuter travel patterns.

With the necessity to work from home minimising the need to live close to centrally located offices, some city dwellers have eyed moves to smaller towns and more rural settings. Here, prices can be lower than central areas, and properties can benefit from more access to green space.

Alongside the relisting of holiday lets, left empty as restrictions stemmed the flow of tourism, this may be a contributing factor to the two-speed market that we have seen emerge – namely high demand in all regions except in London, where flats in particular have fallen out of favour, with Q3 seeing upwards of 40% more available compared to 2019 levels.

It is important to realise we have certainly seen changing attitudes to where we call home, but it is not an entirely new phenomenon.

Again, using London as an example, ONS figures show us that even before COVID-19, in the year to mid-2019, the population grew by 54,000, representing the smallest increase since mid-2004. The data shows that moves

Buy-to-let is a vital part of the housing market

tend to be determined by age, with people in their 30s to mid-40s, along with their children, most likely to leave the capital.

While this churn is likely to be more pronounced in London, it is not exclusive, as we see many of our biggest cities swell and contract, influenced by the lifecycle of their residents rather than their geography.

This cyclical process is fuelled by an inflow of people drawn to all that cities offer, replacing those who wish to settle down after starting families.

FLEXIBLE HOUSING

The private rented sector is well placed to respond to this, because it offers some of the most affordable and flexible housing solutions.

During these uncertain times, these are both valuable characteristics, giving those that do have plans to buy the option to save more while they wait and see how things such as furlough and the stamp duty holiday pan out.

As well as responding to the type of transient market conditions we saw last year, through understanding the needs of a diverse mix of tenants, landlords can provide a valuable facet of the UK’s housing supply long-term. M I JANUARY 2021 MORTGAGE INTRODUCER

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BUY-TO-LET

A time for new beginnings Ying Tan founder and chief executive, Dynamo

J

anuary is traditionally a month of resolutions and new beginnings. It’s a time when we can come back fresh from the festive break with a renewed focus to tackle the year head on.

Due to heavy workloads, this break may have been a little shorter than normal for many, but to be in such a position after the locking down of the housing market back in May and April, we can have no real complaints, despite some frustrations along the way.

THE HOUSING MARKET JOURNEY

The journey of the housing market in 2020, and over the past decade, has been quite a remarkable one.

This was summed up nicely in recent analysis from NAEA Propertymark and ARLA Propertymark.

Over the course of the year, the number of prospective buyers was reportedly the highest it has been over the past decade, with an average of 403 house buyers registered per branch.

This was up from an average figure of 320 throughout 2019, and the previous decade high of 379 in 2015.

Over the past decade, demand for housing is said to be up by 55%, from 260 per branch in 2010.

However, the number of properties available to buy has not changed yearon-year, with an average of 39 available per branch consistently since 2018.

Supply has dropped considerably over the last decade, from 63 on average per branch in 2010.

The number of sales agreed per branch throughout the year hit a decade high of 10 sales on average per month in 2020.

The data also showed that the average proportion of total sales made to first-time buyers decreased from 27% in 2019 to 25% in 2020.

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The supply of rental accommodation reached an average of 203 managed properties per branch throughout 2020, compared to the 2019 figure of 199.

This is the highest figure on record, with an annual high of 213 in October.

The number of buy-to-let (BTL) investors selling their properties remained high, at an average of four per month in 2020. February and September saw this figure spike to five per branch.

The number of tenants experiencing rent hikes has fallen this year, to 36% from an average of 44% in 2019.

Furthermore, agents reported the highest number of prospective tenants searching for homes on record in August, when 101 were recorded per branch, compared to an average of 86 across the year.

This yearly average is also the highest on record, topping 2019’s previous figure of 69.

This makes for some interesting reading, and helps outline the continued strength and durability demonstrated by the housing market and the private rented sector over these challenging times.

Generally speaking, these are areas which have been well supported by the government in 2020.

However, it’s inevitable that a number of people may feel like they have been let down or ignored during this period.

LANDLORD DISCONTENT

Research from The Mortgage Lender suggests that many landlords are feeling abandoned by the government during the COVID-19 pandemic, with 64% saying they have not received any financial support to speak of and 52% believing they should receive such support in the future.

The panel of landlords surveyed by The Mortgage Lender favoured the reintroduction of tax relief on mortgage interest payments for a limited period (63%) and automatic deferral of tax bills for 12 months (52%) as ways to support the sector through its

MORTGAGE INTRODUCER JANUARY 2021

recovery from the financial impact of COVID-19.

Overall, 64% of landlords reported they had received no financial assistance during the pandemic, 20% of landlords had received a Bounce Back Loan, 24% had taken a payment deferral as a precaution and 11% had done so out of necessity.

Of the landlords who had received financial assistance, 44% reported that it had already impacted on their ability to obtain further mortgage funding, while 31% expected it to impact them negatively in the future.

Only 8% of investors felt the assistance they had received would have no impact on their future plans.

There is little doubt that 2020 would have tested any government to the extreme, regardless of its political persuasion. Having said that, some landlords and elements of the selfemployed community are justified in feeling overlooked. Let’s hope that some further solutions will emerge in 2021 to combat these concerns.

AN INCREASE IN SPECIALIST BTL

On a final note, it was interesting to see Paragon Bank highlight an increased focus on specialist buy-to-let lending, after this accounted for 93% of its total BTL activity in 2020, compared to 89% the year before.

Paragon also outlined that BTL lending totalled £1.2bn during the year to 30 September 2020, £1.1bn of which was classed as specialist BTL. Overall, BTL lending reduced by 18.6% during the year compared to 2019, which was said to be a result of the restricted market in the summer months. However, the lender noted that its new business pipeline has increased to pre-COVID levels.

With Paragon’s pipeline at the end of October said to be nearly 15% ahead of March 2020, this helps illustrate just how quickly the BTL market has bounced back.

It’s figures like this which offer additional levels of confidence for the sector moving into 2021. M I www.mortgageintroducer.com

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BUY-TO-LET

Brokers remain resilient Adrian Moloney group sales director, OneSavings Bank

A

s someone who watches a lot of football, I’ve always been fascinated with the way confidence can affect a striker’s performance.

When they’re full of confidence, the game seems to come easily and it doesn’t look as though they can miss.

If it deserts them, though, everything seems to be a struggle and they don’t look like they can hit the proverbial barn door.

It’s such a mercurial quality – here one day, only to disappear the next – that sports psychologists refer to it as the ‘confidence rollercoaster’.

But it’s not just sports stars who experience the confidence rollercoaster.

It’s a term that could also be applied to intermediaries after the bumpy ride the buy-to-let market went on in 2020.

According to the latest research

by BVA BDRC, brokers’ confidence fluctuated throughout the year, closely mirroring what’s been happening in wider society.

After a positive start to 2020, when there was a strong outlook to the economy following the general election, things dipped when the first lockdown was imposed in March and uncertainty set in.

The easing of lockdown restrictions, the extension of the furlough scheme and the introduction of the stamp duty holiday led to an upturn in optimism over the summer and early autumn, before the arrival of the second wave of COVID-19 cases and another lockdown later in the year saw confidence fall again.

As we turn the corner on 2021 and head into a new year, how are intermediaries feeling about the prospects for the coming months?

Well, the proportion of brokers who say they’re highly confident about the www.mortgageintroducer.com

outlook for the mortgage industry as a whole has recovered since the second quarter of 2020, with nearly a quarter of those surveyed saying they’re very confident about the future.

There’s a similar picture when it comes to confidence in the intermediary sector, with the outlook looking brighter than it did earlier in 2020. Two-fifths (40%) of brokers now say they’re very confident about the sector, with just 6% saying they’re not very or not at all confident.

Intermediaries are particularly upbeat when it comes to the outlook for their own business, with more than half of brokers feeling very confident about the outlook for the future, compared with just 5% saying they’re not very or not at all confident.

Those who feel the most confident say it’s down to the qualities of their business, such as being well established,

having a decent number of referrals and enquiries, a loyal customer base and a strong business flow.

Lenders re-entering the market, the stamp duty holiday and increased customer appetite have also been credited as contributing to a more optimistic outlook.

What BVA BDRC’s research shows is that brokers are a resilient bunch, despite all of the challenges that 2020 threw at them. Now that Brexit has finally been achieved, the markets will hopefully begin to settle.

As we look ahead, we should start to see, if not a flattening of the rollercoaster curve, then certainly a smoother ride as things return to some semblance of normality.

If we continue to work together as an industry, we’ll hopefully all enjoy a return in confidence which will have us performing at the top of our game. M I

Intermediaries are upbeat when it comes to the outlook for their own business

JANUARY 2021 MORTGAGE INTRODUCER

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PROTECTION

Making protection more personal Kevin Carr chief executive, Protection Review, MD, Carr Consulting & Communications, co-chair, Income Protection Task Force

I

t has been a tough time for just about everyone in the protection industry this year, and in many different ways.

But despite everything, the industry is still going, products are still available, prices aren’t rocketing up, and people are still getting covered.

Just about.

At the recent Protection Review conference, one of the main topics discussed was the personalisation of protection – and in particular, the trend towards products that are designed and underwritten for specific groups.

In many ways the trend probably began with mortgage-related protection a long time ago – but these days there are products and variations specifically aimed at parents, renters, those with specific health conditions, such as diabetes, and more.

We all welcome new ideas, new products, innovation and clever marketing wherever it helps to grow the market and protect more people.

But is there a caveat or two?  What if all insurers follow the same trend and we end up with dozens – or even hundreds – of so-called personalised products?  Where does the trend end?

When, if at all, might it become counterproductive?  What about underwriting and pricing?  What does an adviser do with a diabetic client who rents, for example?

Might we be seeing the start of what could be called the personalisation race, as we did with critical illness (CI) conditions all those years ago?

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And where does this focus on the individual sit with the original concept of life insurance that stretches all the way back to the Romans, and more recently, access to insurance?

Protection Review carried out an industry poll in the lead up to the event, which found that 80% of respondents expecting to see more personalised products in the future, with only 6% saying they did not.

Robyn Allen, director and adviser at Robyn Allen Solutions, said: “Whilst I long for the potential benefits of personalisation, especially when pushing a case through underwriting that feels like it should be ‘simple’, I worry it may add to the confusion around the protection industry.

“In a sector already filled with jargon and so many different ways of approaching advice, do we need even more options? The inevitable overwhelm factor with protection insurance needs to become a thing of the past, for both clients and advisers.”

Making things personal is good – as long as it’s for the right reasons.

But what seems certain is that the protection market is going to see a lot more of it. M I

NEWS IN BRIEF Tenet Group, one of the UK’s largest adviser support groups, has partnered with UnderwriteMe. The partnership has made the capabilities of UnderwriteMe’s Protection Platform available to Tenet Group’s advisers, in order to drive growth in terms of protection business across the network.

New claims data from broker LifeSearch shows that the firm received 821 new claims between January and November 2020, of which 269 (33%) were for income protection (IP). The number of IP claims was over 50% higher than the previous year.

Johnny Timpson, who won the Protection Review Lifetime Achievement Award in December, is to become a financial services member of the Prime Minister’s Champion Group.

ULS technology has launched its latest Homebuyer Protection product to eConveyancer and DigitalMove clients.

EConveyancer introducers can now offer their clients the option to purchase a Homebuyer Protection policy for £45, available for purchase cases in England and Wales.

COVID claim stats

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Are we seeing the start of the personalisation race?

MORTGAGE INTRODUCER JANUARY 2021

egal & General has announced that it paid £42.8m of life insurance claims within the UK for COVID-19 between 1 March and 1 December 2020.

This is the combined total of paid Life claims for individual (£34.1m) and group (£8.7m), and represents 99% of all COVID-19 life claims for more than 1,000 claimants. Men made up 71% of claims, and the average climant age was 68 years old.

Aviva also recently announced it had paid £36.5m to customers for COVID-19 so far, although it said critical illness claims over the year to end of September were down by 20%. www.mortgageintroducer.com

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PROTECTION

The time is now Alisa Wallington senior product manager, iPipeline

I

own a dog. A quirky little Scottie called Frankie. When I bought Frankie, the thought of not getting him insured didn’t even cross my mind. Vet bills are expensive, generally unexpected, and let’s just say I am not the sort of person who manages their disposable income well…

However, when you tell people you’re getting a dog, you will inevitably enter into at least one conversation with another dog owner about the relevance of pet insurance – it’s a waste of money, you probably won’t need it, get a 0% credit card instead, the list goes on.

People often challenge the value of something until it can demonstrate its worth, and I think this has been historically true of insurance. For example, when I told my partner how much I was paying to insure the pooch, he was aghast.

Cue a maths test to find out exactly how much Frankie had cost me in premiums over the past four years.

Let’s just say it’s a lot, considering he’s a hardy little terrier who has never had any problems. But to me that is irrelevant. What I am paying for is peace of mind. Just because it hasn’t happened yet doesn’t mean it won’t happen in the future, and I am happy to continue paying for the security of knowing that if it does, I’m covered – and it has absolutely nothing to do with the fact I cannot be trusted with a credit card.

The UK is clearly going through a period of uncertainty right now. We don’t know when the COVID-19 vaccine will be fully rolled out, and we don’t know what impact the massive NHS waiting lists, delayed cancer appointments and postponed treatments will have.

Lockdown’s adverse impact on the nation’s mental health will undoubtedly www.mortgageintroducer.com

affect lives and livelihoods for months, and in some cases years, to come.

On the plus side, our industry has done an incredible job of proving the value of personal protection, and we can all be proud of the vital role we have played in that. Insurers paid a total of £90m during the height of the COVID-19 crisis to support the families of people who died due to the virus, with an average payout on term insurance expected to be £63,000.

Whilst no amount of money is ever going to replace a life, we have helped protect our clients’ mortgages and incomes when they needed it most.

Protection pricing has largely remained stable. In fact, the cheapest mortgage protection term rates have dropped on average. Products and coverage remain largely unaffected – except perhaps for short deferment periods on income protection.

Providers have stayed fully open for business throughout this period, and their service on the whole has been admirable. Yes, we have had some difficulties with medicals, but providers have adapted and evolved to help business continue to flow.

GROWING AWARENESS

As we start to accept the ‘new normal’, most of us are still trying to cling on to the life we knew and regain control wherever we can. We still want to buy things and upgrade or change our homes. So why, when it comes to protecting those things, do we underinsure against the big risks, such as the death of a loved one or loss of income through illness or injury, and overinsure the smaller risks, such as the unexpected vet bill?

Research by legal services provider Epoq reveals that nearly a third (32%) of Brits have pet insurance, compared to a quarter with some form of income protection. In addition, 31% have critical illness cover and 31% have private medical insurance.

In my opinion, awareness is key.

“It won’t happen to me” is quickly becoming “what if it happens to me?”

What people need now is reassurance and guidance

Consumers have never been more open to the protection conversation, because they have never been more aware of the fact that it really could happen to them. For many, this pandemic has created a constant state of panic and anxiety, so what people need now is reassurance and guidance.

Financial advisers can play a crucial role in providing this by continuing to help consumers fully understand the protection options available to them, and by securing the best cover for their individual needs.

In response to the debate over whether protection is worth it, providers have also delivered massive growth in value-added services.

Many of these offer a tangible return on monthly premiums by providing access to everyday services such as physiotherapy, remote GPs and counselling, some of which may now be limited or non-existent via the usual channels due to COVID-19.

These additional services often prove more relevant and valuable to the consumer than the underlying protection cover itself.

Our industry is here to provide a solid underpinning of financial resilience for when things don’t go well in life.

No one knows what the future holds, but now is the time to ensure every mortgage is fully protected, start those conversations, and help clients regain the peace of mind they so badly need. M I JANUARY 2021 MORTGAGE INTRODUCER

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PROTECTION

Self-employed and SME opportunities Mike Allison head of protection, Paradigm Mortgage Services

R

ight now it may be difficult for many mortgage advisers to see beyond the ‘virtual in-tray’ of new enquiries, or perhaps more pressing, of existing ones they are trying to get placed with satisfactory outcomes among the challenges of higher deposits and tighter underwriting.

It is easy to get somewhat frustrated by these issues, and of course mortgage advisers and their staff are not immune to the challenges of stress.

As we approach the sunset of the existing furlough scheme, and while many are still digesting the workings of the new Job Support Scheme announced by the Chancellor towards the end of September 2020, it’s worth remembering that the sector in which we work is, in relative terms, healthier than many.

When a different norm is established there will be opportunities in our sector, too, as many more clients in the small business (SME) arena will continue to seek help from advisers in finding their mortgage, especially those in businesses that are relatively newly established.

There is good news from the SME sector, too. According to a statistical bulletin recently released by the Office for National Statistics (ONS), the number of businesses removed from the Inter-Departmental Business Register (IDBR) in the UK in Q2 2020 was slightly lower than the Q2 average for the past three years.

So, despite the pandemic, business closures do not seem to have increased; the support given by the government may have had an effect, but we’ll take any good news at present.

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Given that some 99% of all UK businesses are ‘small’ or ‘micro’ sized (0-49 employees) there has to be a possibility that many of these are surviving and continuing the trend of the ‘births versus deaths’ gap of British firms widening.

Logically, therefore, our sector will be called upon to help many more people working in small businesses acquire their mortgages.

In taking a broader look at the SME sector, Legal & General’s latest research finds that there’s a direct correlation between size of company and trust: the smaller the company, the more trust the employee has in their employer. So, what does this mean for advisers? All advisers – mortgage or otherwise – have opportunities to help support that trust by helping them to support their employees.

Nine out of 10 CEOs believe wellbeing initiatives are key to driving long-term changes to their business model; from an advice perspective, the insurance industry can help.

Nearly three quarters (74%) of workers in micro-businesses trust their employer to look after their wellbeing, compared to only 42% in mediumsized businesses, according to Legal & General’s research.

Chief executives are increasingly recognising the need to keep their people feeling safe, but also connected, engaged, productive and – more than ever – physically and mentally healthy.

Wellbeing is no longer a word just to trot out at board level to prove that a policy exists.

The challenge is how to physically support employees at a time when thousands have been taken out of their ‘normal’ working environment and may be struggling to cope as a result, especially given the new wave of actions recently announced by the government, forcing many to return back home to work.

MORTGAGE INTRODUCER JANUARY 2021

The message is clear: employees in small businesses are stressed and need support to varying degrees. Clearly there are the physical impacts, with more than half of employees reporting new aches and pains during lockdown, but it is the psychological aspect that is of the greatest concern.

A recent survey by Totaljobs found that seven in 10 said the loneliness they experienced during lockdown was having a negative effect on their wellbeing – sleep, self-esteem, eating habits. A quarter said it was impacting their productivity.

According to the research, 77% of medium-sized companies have a wellbeing strategy, in contrast to 39% of micro-employers. At the same time though, employees within mediumsized companies expressed the most uncertainty about their employer’s benefits communication.

So, the strategy might be in place, but thanks to ineffective communication, they’re failing to win hearts and minds.

All advisers working within our sector have access to wellbeing programmes at very little cost to employers which can deliver handson support to employees. UNUM, for example, offers specific wellbeing checks as part of its group schemes.

This provides expert guidance and selfmanagement techniques for employees who may be struggling, helping them to make realistic changes that can help to improve their performance, mood, energy and productivity.

Trained professionals will consider all aspects of wellbeing – mental, physical, social and financial – and follow up with recommendations to help employees get connected with the right tools and resources. Everyday pressures affecting the majority of us at present, such as workload, dealing with change, the impact of COVID-19, working from home or returning to the office, and many other aspects of our new daily lives are covered.

Paradigm Protect has been working closely with UNUM on beating the drum about these messages for a while now, but it is more relevant than ever to help small business employers look after the health of their employees. M I www.mortgageintroducer.com

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PROTECTION

Let’s keep in touch Xxxxxxxxxx Andy Philo director of strategic xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx partnerships, Vitality

J

anuary is usually a time when people look at the coming year with optimism, setting new goals and promising to make changes.

While things are different in 2021, many people will still consider this a time for reflection and positive change.

Annual statements are also often issued now, providing a 12-month report on the financial products a person holds. For protection products – whilst not a regulatory requirement as with products such as pensions – providers are increasingly supplying these to their clients.

Protection policies can provide a crucial financial lifeline for those facing

an unexpected illness, or support should they find themselves unable to work. It is therefore important that policyholders receive annual statements to remind them of what and how much cover they have.

It is also extremely beneficial for a client to regularly hear from their provider, as their circumstances may have changed since they took out the policy. Annual statements give the adviser an opportunity to have that important conversation to ensure the policy is still appropriate and providing the right cover. Too often people will forget that they have a policy, or be unclear what it covers, possibly even finding themselves underinsured or not protected at all.

Whilst the benefits of annual protection statements are clear, some providers cite concerns around policy cancellation. Within Vitality, we certainly don’t believe that to be

correct, and have found the opposite to be true, with members considering if it is inadequate and making the necessary adjustments to their policy.

The design and accessibility of an annual statement is also important, and whilst there is no standard format, a clear and easy to digest statement can ensure clients engage. Many providers also offer additional benefits throughout the life of the policy, not just at the point of claim, which it can be useful to include. It’s important for your clients to receive value from their policy, not only when they claim.

As an industry, we strive to ensure that people are equipped to make the right choices about their cover. If we can commit to providing annual statements that help clients understand what they have in place, and what they don’t, we can increase understanding of our products and ensure people have the very best cover. M I

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PROTECTION

Stark stats show need for change Jeff Woods campaigns and propositions director, Sesame Bankhall Group

T

he findings of the recent Association of Mortgage Intermediaries (AMI) Protection Specialist Group survey of 5,000 consumers and 500 advisers generated some stark statistics.

Chief amongst them was that, while 97% of advisers say they mentioned protection when talking to clients, only 36% of customers remember it.

A damning set of stats if ever I saw it; however, it doesn’t end there. Over half of consumers didn’t believe the claims stats given by product providers, and a similar number felt the only reason advisers would discuss protection would be to earn commission.

So, what’s to be done? I’m sure that almost all advisers did mention protection, but I also believe the 64% of customers who did not recollect it.

It simply highlights what many people already know: it’s the effectiveness of the conversation that really matters.

Not getting the full attention of customers also explains why so many are left vulnerable to financial shocks.

I fully appreciate that good protection conversations don’t come easily to everyone. That’s why, within Sesame Bankhall Group, we’ve implemented new processes to help overcome some of the obstacles.

We are already seeing some positive results. Initiatives include: 1. Send information to the customer pre-appointment. We’re experimenting with short animated videos, along with a simple questionnaire on their existing provision. It’s the first step in making protection easier to discuss.

2. Create a risk report to use in the first meeting. Get the customer to acknowledge it and give some thought to the information within it.

3. Talk about protecting income first. Most of us will run out of cash at some point, so what will we do? Utilise information from bodies such as the Money Advice Service.

4. Challenge yourself not to mention protection, life insurance, critical illness or income protection.

They’re the solution, and until you have commitment, and a desire to do something about the situation, you shouldn’t mention the product.

These methods may not suit everyone, but the important thing is to think about the challenges, and then come up with a strategy.

If your customer truly buys into the need, they’ll be less likely to doubt the stats or your intentions, and more likely to remember the conversation. M I

Good times, bad times Charlie Gray learning and development specialist, LifeSearch

L

ast year was one of struggle and triumph for the protection industry. The pandemic has helped consumers understand the need for protection more than ever before, so our industry has had the chance to prove its worth.

Income protection finally has the opportunity to shine, demonstrated by rising numbers and increasing awareness, with the Income Protection Taskforce at the forefront.

A key challenge was the halt in mortgages, which in turn saw people weighing up the need for cover.

However, good advisers would have been able to overcome any reluctance,

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because even without a set date for a mortgage completion, clients should still consider the fact they could fall ill or pass away, and the need for their family to be able to purchase that property doesn’t disappear. As always, having an honest and open conversation about the risks involved was essential.

Despite the fact that our industry stayed strong during these uncertain times, protection underwriting proved a sticking point. The pandemic saw stricter underwriting rules, harsher ratings and lower acceptance rates from most insurers, which made it harder to get more people protected in the right way. We have seen more mental health exclusions, clients with diabetes struggling to get life cover and those with the need for high levels of cover not being able to have their screenings.

This resulted in advisers having to evolve their approach and move out

JANUARY 2021

of their comfort zone. Many had to go back to the drawing board and build their knowledge of the ever-changing COVID-19 rules with insurers they weren’t used to dealing with.

Those advisers who were willing to adapt have played a huge part in ensuring families were protected despite the ongoing challenges.

The need for protection remains the same, so thankfully we are slowly starting to see more mortgages being agreed, screenings being adapted to a virtual world and underwriting starting to revert back to the way it was.

We all need financial protection and a roof over our heads in case the worst happens.

As an industry, it is our responsibility to continue going above and beyond to make sure that our clients have the best cover in place to safeguard them against a future that still holds so much uncertainty. M I www.mortgageintroducer.com

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GENERAL INSURANCE

A hard market is squeezing insurance capacity

UK properties insured incorrectly Geoff Hall chairman, Berkeley Alexander

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t might be a new year, but the same old problem still exists when it comes to inaccurate valuations for insurance.

The latest data has again highlighted a massive shortfall in insurance cover for UK commercial properties.

Building insurance valuation site RebuildCostASSESSMENT. com estimates that UK commercial properties are under-insured by a massive £325bn. This means that shops, factories, warehouses and many other buildings across the country are woefully under-protected in the event of a claim for damage.

Businesses already struggling in the wake of COVID-19 may not be able

to survive the consequences should a claim occur.

It is estimated that nine out of 10 commercial properties in the UK are insured for the wrong amount.

In 79% of these cases, this is due to underinsurance, which means that when a claim is made, the payout for the damage can be severely reduced.

On average, buildings are only covered for 69% of the amount they should be – a considerable shortfall in cover.

The data also shows that owners of as many as 580,000 homes in the UK, worth over £1m each, are also significantly underinsured.

Meanwhile, 14% of UK properties are over-insured. On average, these clients are covered for 121% of the correct amount, so are paying more than they need to. To make sure properties are not threatened by over or under-insurance, brokers should ideally help their client arrange a professional valuation every three to five years.

New year, new flood warnings

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arnings rarely come starker than this. Zurich Insurance has called for urgent action to help communities preparing for the worst, suggesting that the UK is at risk of a “double disaster”, with both flooding and the COVID-19 pandemic.

The National Oceanic and Atmospheric Administration (NOAA) is forecasting a more severe hurricane season.

Flooding can devastate entire communities, and the evidence suggests that it is not only inevitable, but likely to occur in the immediate future. The UK government currently spends £2.6bn on flood defences in England, an amount set to double by 2026 in efforts to improve defences. Policies allowing building on plains liable to flood will also be reviewed.

Flood Re is a joint initiative between the UK government and certain insurers to

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make the flood cover aspect of household insurance policies more affordable. Every insurer that offers home insurance in the UK must pay into the Flood Re scheme.

This raises £180m every year and works with insurers behind the scenes.

There are also commercial schemes available for businesses and property owners having difficulty purchasing cover for damage caused by flooding, either because they’ve suffered previous damage are located in areas of high potential risk, or have had flood terms imposed.

Although the news agenda is focused on COVID-19, the spectre of flooding looms large. There will be many property owners out there who could be under insured or without any cover – whether residential or commercial – and in desperate need of your professional advice.

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ates are rising across the board, and capacity has become increasingly restricted as the hard market bites, meaning premiums are rising despite – in some cases – tighter restrictions being placed on cover terms.

For brokers and advisers arranging general insurance (GI) on behalf of clients who have enjoyed relatively clement terms and premiums over an unusually long soft market period, it’s difficult to manage expectations and explain why premiums have gone up, or in some cases cover can’t be secured.

“Difficult to place risks also take more time to negotiate in a hard market” What does become starkly clear in a hard market is the vital importance of working with a GI provider that has a wide panel of insurers. Fortunately, at Berkeley Alexander we have a panel of 60 insurers, meaning we can place most risks, from those that are deemed vanilla to those that are non-standard, despite hard market restrictions.

Difficult to place risks also take more time to negotiate during hard market conditions. Like many of us, insurers are continuing to work remotely due to COVID-19, and therefore face communications and tech challenges which have exacerbated delays. Added to this, clients are seeking alternative quotes due to rising renewal premiums, and so the volume insurers are handling is increasing.

Think well ahead. If a new purchase, start the GI at the time of the mortgage offer; if a renewal, start the process at least two weeks before renewal date, longer if the case is more complex.

For those cases that don’t fit an online portal, it can take days or even weeks now, not hours. M I

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REVIEW

EQUITY RELEASE

Still plenty to be positive about Stuart Wilson CEO, Air Group

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ust like that, we find ourselves at the start of a new year. 2021 – how good it is to see you.

Of course, by the time you read this, we’ll perhaps be getting a feel for how the next 12 months will unfold – although, given the changeable nature of the last year, maybe we should not look too far ahead.

That being said, with the year sprawled out before us, how can we not consider what might be the key areas of focus, specifically in the later life lending space.

First up has to be a continued focus on technology, and how advisers utilise it in order to not only secure greater numbers of clients, but also in terms of client interaction, sourcing, dealing with lenders, and in fact the entire process through to completion.

If 2020 taught us anything, it’s just how important quality tech is when it comes to making businesses work and providing as smooth a journey as possible. A year ago there might have been a level of reticence about client interactions via Zoom or Teams, but now we must absolutely consider this method as key.

This brings with it its own unique challenges, particularly in the later life space, where advisers often get the best feel for a client by meeting them. We’ve talked before about the greater risk of client coercion – from relatives, for example – or the potential for influence to be wielded on a client to choose a certain option when it may not be in their best interests. These concerns are more difficult to address when you’re not quite sure what may be going on off-screen, but given the limited options available, it’s a problem that has had to be surmounted.

In other parts of the later life advice process, tech has been absolutely key, www.mortgageintroducer.com

and we may well decide that this was the year when the systems which advisers rely upon woke up to what was truly required, and what they could and should be delivering.

Part of the reason we established and launched our product sourcing system, Air Sourcing, was that we felt later life advisers were criminally underserved in this area. They were having to work with slow, inflexible platforms and interfaces developed in a bygone era.

Therefore, we wanted to deliver and maintain something which was far beyond that: up to date in terms of look and content and able to respond to the changing marketplace. A system which

“If 2020 taught us anything, it’s just how important quality tech can be” was not just lifetime mortgages, but brought in every single product option for those seeking later life lending.

This is why we were so pleased to see Air Sourcing recently come out as the Best Product Sourcing System for the second consecutive time in the Tech Edition of the Mortgage Benchmark, put together by Smart Money People.

This wasn’t just based on those operating within equity release and later life lending, but the entire mortgage market. Therefore to score so highly in areas like accuracy, completeness, ease of use, functionality, and support and reliability, was testament to the work the team puts into the system, as well as our continued response to evolving technology and the changing needs of the adviser market.

That’s a journey that must be continued throughout the year ahead.

I’m not sure any adviser is now going to settle for second best when it comes to the systems they use and rely upon.

Finally, it wouldn’t be the later life market if we didn’t have one eye on the regulator. In the middle of last year, we were given an update on the Financial

Conduct Authority’s (FCA) thinking with regards to later life advice, and since then it has continued to work with firms on key areas. In addition, lifetime mortgages were specifically mentioned towards the end of 2020 in its letter to intermediary firms.

One key part of its work is based around advisers and the personalisation of advice for clients, the focus on challenging client motivations for taking out an equity release or later life product, and whether the systems and processes advisers have in place are robust enough to weed out clients who are not suitable for these products.

The Equity Release Council (ERC) recently published a Best Practice Guide which highlights the key areas advisers need to be reviewing to ensure clients receive a high quality and personalised service.

The guide probably reflects what many specialists in this market are already doing, but the FCA’s review and subsequent letter means no one can afford to be complacent, and tinkering around the edges of existing practices probably isn’t good enough in many cases. Personalised advice based on clear customer needs must always be the driver.

Also, it should be noted the ERC does not represent all lenders or advisers active in the later life market, and gold-plating regulation can sometimes have unintended consequences. It is vital that all participants in the sector keep an acute focus on customer outcomes and the existing regulation that is in place.

In 2021, therefore, we’d like to see the various trade bodies, policymakers and thought leaders across our fledgling sector align around how this market can evolve to serve a vital customer and societal need.

Overall, I think there is much to be positive about for the coming year, and with a growing demand for both advisory services and later life products, it will be all about making the most of it and ensuring the client service is of the very highest quality. M I

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REVIEW

EQUITY RELEASE

A bright future for equity release Alice Watson Xxxxxxxxxx head of marketing and communications, xxxxxxxxxxxxxxxx, Canada Life xxxxxxxxxxxxxxxx

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s we reflect on the challenges presented by 2020, research indicates that 2021 could bring positive news for equity release. We surveyed financial advisers towards the end of 2020 about their expectations over the next 12 months and beyond, revealing optimism and commitment to the sector.

Financial advisers are confident about the strength of equity release.

Almost three quarters (72%) expect the value of the market to grow this year, with a fifth (20%) thinking it could increase to more than £6bn in value.

In order to facilitate this growth, advisers predict some changes to the

current customer demographic. More than half (57%) of those polled believe the average age of the customer will get lower, while 45% believe the size of loans issued will get larger.

The way clients are using the funds is predicted to change, too; 70% expect funds to be given to children or grandchildren in 2021 – an increase from 60% during 2020 – and 65% think funds will be used to pay off debts, down from 71% in 2020.

There are also a number of external factors that advisers expect to encourage greater demand. First, negative perceptions of equity release products are starting to wane, as customers become more comfortable with the growing range of products and increased protection available.

The financial impact of coronavirus on families is also likely to drive customers towards equity release, as they look to release household wealth

without the need to move or downsize.

Insufficient pension savings and an increased likelihood of bringing debt into retirement are also predicted to lead to further demand.

While there is no doubt that 2020 was challenging for many reasons, it is great to see so much positivity for the market looking forward to next year. Advisers are clearly anticipating a growth in demand driven by both improved awareness and families reassessing their finances in light of the pandemic. Predictions around a shift in customer age and increase in loan size point to a change in how homeowners view their home as a financial asset, much like pensions or ISAs. The world is changing around us, but closer to home we need to consider how best to use our overall wealth to provide more secure financial futures.

Advisers are best placed to show clients how to plan for that future. M I

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REVIEW

EQUITY RELEASE

Ready to roar back Andrea Rozario chief corporate officer, Bower

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hall we call 2020 a write-off? I had high hopes for the ‘Roaring Twenties’ part two, but I think

by March everyone knew that 2020 was going to be a stinker. I think the outlook is much better for 2021, so shall we start afresh?

Despite my optimism, for our industry of equity release, there’s some key questions I want answers to early on. Namely, how can we make the 2020s the decade we really break into the mainstream? And what are the areas we need to improve on most?

Firstly, for any market to be properly robust and respected, I think that the customers need to be as clued up as possible. Over the years we have launched new products, new approaches to advice and tons of innovations and modernisations within equity release – we need to make sure our customers keep up. I think we have done a good job here, but there is still much to be done.

According to the most recent quarterly report from Pure, more than 66% of over-55s still don’t fully grasp the no negative equity guarantee.

This is the bedrock of modern equity release, so we must reverse this and ensure that all our customers, and prospective customers, understand this essential safeguard. Our market has come such a long way in the last decade, but we need to go further.

But how far can we go? In the past 10 years you could make an argument for equity release being the standout success story of the broader mortgage market. Back in 2010 it took an entire 12 months to break £1bn in lending, whereas now the market does that in a single quarter. So, in the 2010s our little old market has quadrupled in size.

Not bad, you might think? But how does this relate to the potential size?

www.mortgageintroducer.com

Well, according to figures from Halifax, the total equity available to the over55s is a whopping £499bn.

That means that the equity release market is running at around 0.8% of the total equity available nationwide, which I would say implies there is still much more room for growth. Of course, equity release is a specific and tailored offering that only suits a small number of people, but I think we can go further than under 1%!

Next, with the long tail of coronavirus with us for who knows how much longer, we need to make sure that both advisers and customers alike are protected and equipped with everything they need to deliver advice safely and effectively.

Throughout the pandemic, our advisers at Bower have been using video meeting software and technology to deliver their advice as if they were in their client’s living room – a modern wonder, and something we need to continue to make as simple as possible for all our customers.

After all, the average equity release customer – and myself for that matter – may not be as au fait with this sort of technology as they could be.

Making this process as stress-free as possible should be a goal for everyone in the industry, and continuing to come up with innovative solutions revolving around user-friendly tech could take

us to a whole other level. Consider, for example, the ease and speed of jumping from one meeting to the next – all while avoiding the M25!

Ultimately, I’m sure we’re all glad to see the back of 2020. With a fresh year ahead of us, I am excited to get to work and continue to champion equity release products.

I know that lifetime mortgages are not suitable for everyone, but I am certain we can go further.

Just a few years back, I was hailing the great success of the market breaking the £1bn barrier. But now, with a new decade ahead, I think it’s more than reasonable to aim to double the size of the market once more.

To get there, though, we do need to fix some issues. Customer knowledge is still trailing behind where it needs to be, and so a concerted effort to remedy this needs to be at the centre of everything we do.

Education, education, education.

Once our customers know everything there is to know about modern equity release, they will be empowered to make the informed decisions we need to continue to deliver our advice safely and clearly, embracing the available technology, while making it as simple as possible for our older customers.

If we can crack these two key battles, I still think the 2020s could come roaring back. M I

Customer knowledge must be at the centre of everything we do

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REVIEW

CONVEYANCING

The need for advice remains strong Mark Snape managing director, Broker Conveyancing

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he start of any new year is a time that normally holds the promise of opportunity, of a new slate having been wiped clean, and of 12 months stretching out before us which have all the potential to be both profitable and fulfilling.

Even the most optimistic among us might be struggling to feel any of this right now, and while we might all welcome the end of 2020, it would be very difficult to conceive of the problems that have infected the last 12 months suddenly disappearing.

Indeed, at the time of writing, with vast swathes of the country being placed into a lockdown which could last for months, Christmas having been nothing like we might have anticipated, and there being plenty of fear of the unknown, I have sympathy for those looking on 2021 with little enthusiasm.

That said, it is important to stress the positives, which those working within the housing and mortgage market should be thankful for.

For a start, our market is open.

Compared to so many industries and sectors, we are undoubtedly the lucky ones. It might not feel like it in a personal sense, but professionally I would suggest there can be few professions that have come through the past nine months in better shape.

The consumer demand has been phenomenal, aided of course by the stamp duty holiday, which should mean that over the next three months we are likely to see a significant level of completions that will deliver muchneeded income.

Add to those mortgage completions the activity in ancillary services and

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products such as protection, GI, legal services and conveyancing, and I would hope that advisers across the land are ‘making hay while the sun shines’, ‘fixing the roof while the weather is good’, or any other phrase you might like to utilise.

Essentially, we have been presented with market conditions that so many other professions would give their eye teeth for, and even if the rest of 2021 post-Q1 looks a little uncertain, I’m confident there is sufficient activity to ensure the whole 12 months continues on a positive footing.

MARKET CONFIDENCE

That confidence appears to be mirrored currently by advisers as well. Just before Christmas, Masthaven issued research into this very topic, with nearly three-quarters of advisers saying they are confident about the market in 2021, 97% saying they are confident about their own firm’s prospects, 63% that they expect to see their revenues rise during the year, and 36% that this increase will be in double-figures.

When asked about the most prominent challenge they are likely to face during the year, 30% felt it would be economic uncertainty, 23% said lender service levels and 19% thought it would stem from local and national lockdowns caused by COVID-19.

Of course, all of these are intertwined in a very real way, and as mentioned, with the anticipated busy Q1 ahead of us, and – at the time of writing – no prospect it would seem of an extension to the stamp duty holiday period, we are likely to see all of those concerns combining in a way which could make for a tricky period.

This is particularly true when it comes to getting business completed before 31 March, and the knock-on effects we may see on new business appetites while lenders are presumably having to relocate resources in order to

MORTGAGE INTRODUCER JANUARY 2021

deal with those completions.

The full economic impact of COVID-19 is still to be ascertained – we now know that the furlough scheme has been extended to the end of April, and this may well make the difference to businesses in terms of their ability to continue trading in the future, and to keep staff ‘employed’ to a point where they can welcome them back.

However, there seems little doubt that unemployment levels will continue to rise. This will clearly impact on incomes and consumer confidence, and it’s at this point that we might see the housing market losing some of its current momentum.

Nevertheless, there are still reasons to be positive, not least among which is the continuing demand for advice in a marketplace where individuals’ finances could be much changed, where there is a greater need for specialist lending advice, where demographics continue to shift, where people are increasingly looking for new areas and types of property to live in, where there is an ongoing surge in demand for later life lending, where the self-employed continue to be treated differently, where potential first-timers should hopefully have more high loan-to-value (LTV) product options to choose from, where the number of mortgages coming up for renewal numbers billions of pounds – the list could go on.

Plus, as mentioned, if you are not simply looking at the mortgage market for your business income, then there is a plethora of client needs across any number of sectors which you could be covering – or at the very least, introducing on to specialists in order to secure referral fees and keep control of the client.

In that sense, 2021 does not look very different to all the other years in recent memory. Demand for advice is strong, and in fact has probably grown over the last 12 months, and that need for advice will not change.

This is the bread and butter, the foundations of any advisory business, and those who can capitalise on it and the opportunities it affords, are likely to do very well, not just in this year, but any year. M I www.mortgageintroducer.com

REVIEW

CONVEYANCING

Changing times for the industry Karen Rodrigues sales director, ULS

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longside ‘unprecedented’, the ‘new normal’ became one of the most over-used phrases of 2020 as we all attempted to understand how the pandemic would impact our lives in the long-term.

Now, with the roll-out of vaccinations underway, the prospect of normality is coming into sight – but what will it look like?

The rapid spread of COVID-19 in the first quarter of last year triggered a tsunami of change for everyone as we all looked for ways to live our lives remotely. Naturally, technology became a cornerstone of this change as people worked, shopped and socialised from home.

Zoom, a previously little-known video calling platform, became so widely used that within a matter of weeks it was granted verb status, as people ‘Zoomed’ their friends, family and colleagues. In the mortgage industry, lenders rushed to review their lending policies to include greater acceptance of automated valuation models (AVMs), while all businesses invested in systems and processes to better enable remote working.

As we progress through, and emerge from, the pandemic, some of the changes it brought with it will disappear, while some will become a permanent feature of our lives. We’ve already seen things move on, of course.

Remember clapping for the NHS on a Thursday night? Or getting excited about a Zoom pub quiz? So, what will be the permanent property market changes as a result of COVID-19?

POTENTIALLY PERMANENT

One of the most interesting changes triggered by the pandemic has been in the way that people think about their homes. For the huge numbers of people www.mortgageintroducer.com

forced to work from home almost permanently, the compromise of space in return for the short commute and access to social life on offer in cities has become less appealing.

Rightmove released figures in August showing that, in June and July, the number of buyer inquiries made through its platform from people living in 10 UK cities soared by 78% compared with the same period last year. There was a 126% increase in people considering properties in village locations, compared with a 68% rise in people searching for towns.

The number of inquiries from Liverpool residents looking for a village property was up by 275% compared with last year. Edinburgh residents were second most likely to be considering an escape to the country, as village inquiries jumped 205%, and in Birmingham they were up 186%.

The types of property that people are looking for has also changed. Another Rightmove report from the summer found that a third of buyers said lockdown has impacted what they’re looking for in their next home, with the biggest change being the number of people who now want a bigger garden, or access to one. Nearly twothirds (63%) said that this was now a consideration in their search, while 43% are looking for a larger property than previously.

For renters, too, the impact of being locked down has changed their requirements. Whereas studio flats were the most sought-after property type at the beginning of the year, most renters were found to be looking for a two-bed house, and flats had completely fallen out of the top five most sought after property types.

Whether the appetite for more rural locations and larger properties continues once cities regain their bustle is yet to be seen. However, we do already know that many businesses have seen little drop in productivity from their people working remotely – but they have reported a big drop in costs, and there have already been

reports of companies terminating their leases on large office spaces.

So, there is likely to be a permanent shift towards a greater proportion of home working, and this will probably support the ongoing trend for people to want more space and move further away from cities.

DEFINITELY PERMANENT

Money talks, and the key influence on whether or not a change is likely to remain permanent is if it provides a more effective and efficient solution.

In these instances, it’s likely that COVID-19 has merely accelerated an existing trend, rather than created a completely new one. So, for example, people had speculated about the increase in home working for years – the pandemic simply shifted people out of their existing habits.

The same goes for technology.

How long have we read about tech transforming the industry, only for people to continue to follow the same path? 2020 has forced them to follow a new path and change their habits – and for many, this has led to a far more effective way of working and living.

Conveyancing is a great example of this. In December 2020, our online conveyancing platform DigitalMove surpassed 20,000 instructions, and we expect this to continue to grow at pace in 2021. Judging by this demand so soon after its launch, it’s clear that centralised digital platforms for conveyancing is a trend that’s here to stay. Tech-driven conveyancing makes sense for so many reasons, and it brings an antiquated process up to speed with the levels of service we expect in other areas of our lives.

It was always going to be the future, but thanks to a forced shift in habits, it is now the present. For a growing number of brokers, digital conveyancing – using platforms like DigitalMove and services like eConveyancer – is the new normal and will be a key element in helping homemovers go forward into their new lives this year. M I JANUARY 2021 MORTGAGE INTRODUCER

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REVIEW

EDUCATION

Planning for future challenges John Somerville head of regulatory relationships, corporate and professional learning, LIBF

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he new year is a great time for taking stock and making plans, and 2021 is no different. If anything, there’s so much happening in the world of mortgage advice right now – along with the wider economy – that planning for 2021 isn’t just a good idea, it’s essential.

Let’s start by mapping out what we might expect to happen over the next six months.

FIT AND PROPER

Mortgage advisers will continue to be in high demand for the next three months, as customers rush to take advantage of the stamp duty holiday and the Help to Buy scheme.

Meanwhile, there’s the Senior Managers and Certification Regime (SMCR). You have until 31 March to ensure all staff in certified roles are ‘fit and proper’ to perform them.

Most of us can mark our calendars as ‘busy’ up until 31 March – the deadline for both SMCR and the end of the stamp duty holiday.

Soon after that, we’ll be coming into the spring. This is always a time when people think about moving, regardless of what’s happening in the wider world, because when it comes to moving house people are ruled by their hearts more than their heads.

We’ll need to be agile to respond to what customers want. Hopefully, the vaccine rollout will be well underway, customers will be more easily able to view properties, and the rest of us can return to our offices. However, there are still many unknowns.

Will demand for properties outside the UK’s main conurbations continue?

Will the prize for remote working be moving to the forever home early?

How will the economic aftershocks

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of COVID-19 and Brexit affect affordability? It will be interesting to see what sort of deals lenders will be offering by April. Maybe they’ll come up with something new to appeal to those who missed the stamp duty holiday deadline. Perhaps we’ll see more high loan-to-value (LTV), low 2-year fixed-rate deals. Or the Chancellor may well announce a new incentive altogether.

Another item to factor into your 2021 planner is the Financial Conduct Authority’s (FCA) commitment to “investigating how firms describe the fees and charges payable” on equity release products. In its recent letter, the FCA promised to carry out this review in the first half of 2021.

“Staying up to speed is going to be increasingly important as the year progresses” The regulator is rightly concerned for customer wellbeing, and points out that the impact of COVID-19 “may exacerbate the risk of unsuitable advice, particularly if consumers seek to address any short-term financial pressures caused by the crisis without understanding any longer-term implications.”

Demand for equity release is on the rise as the UK faces the possibility of a double-dip recession. This, coupled with the FCA’s ongoing review, means there’s never been a better time to expand your skillset with an equity release qualification.

At LIBF, we have worked with the Equity Release Council (ERC), UK Finance and major high-street banks and lenders to update our Certificate in Equity Release (CeRER), which covers much of what the FCA has said it expects from mortgage advice professionals.

CeRER goes into the detail of how to match equity release schemes to your customers’ needs, suitability and affordability, and crucially, how to

MORTGAGE INTRODUCER JANUARY 2021

assess the risks to customers who take out equity release schemes and when these might arise.

In times of economic uncertainty, another market where we might anticipate a rise in demand is the remortgage space.

Many homeowners, especially those whose businesses or incomes have been adversely affected by recent economic shocks, will take advantage of the opportunity to remortgage while interest rates remain low.

Of course, you’ll have covered remortgaging in your CeMAP qualification, but if you did it some time ago and are looking for some continuous professional development (CPD) you might consider a quick refresher with the CeMAP Revision Tool (CRT). It’s an online exam practice tool for current and past CeMAP students which will help you assess your current industry knowledge through mock exams and topic tests that provide personalised feedback.

Staying up to speed is going to be increasingly important as the year progresses, as mortgage advisers need to respond to ever more unpredictable economic circumstances.

It’s important to remain agile, and that means being savvy about how the market and customer decision-making is being influenced by legislation, regulation and the economy.

STRATEGIC APPROACH

While there are many deadlines, dates and certainties to mark out on the 2021 calendar, there are likely to be some unpredictable events too.

That’s where a strategic approach to your CPD and ongoing professional education will give you the edge.

If you’re looking to enhance your professional qualifications, CeMAP Diploma can help. It will develop your understanding of how financial products and individuals respond to economic changes and that will give you, and your firm, the edge when it comes to planning and meeting the challenges of the future. M I www.mortgageintroducer.com

REVIEW

AML

One regulator to rule them all Martin Cheek managing director, SmartSearch

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he European Commission is considering new legislation for 2021, with the intention of closing the door on ‘dirty money’ as part of its pledge to step up the fight against money laundering.

One of the leading ideas is the creation of a new authority in Europe – modelled on the US Financial Crimes Enforcement Network (FinCEN) – aimed at tackling money laundering and financial crime.

Of course, post-Brexit the UK will have no part to play in an EU authority. But it begs the question, should we be considering something similar in the UK? Is it time to create a single regulatory authority to combat the criminals seeking to exploit the opportunity to launder cash through the property market?

With more than 20 regulatory bodies in the UK to deal with money laundering, surely it would be much simpler for one regulator to rule them all. Is it time to do away with this alphabet soup of trade bodies and regulators and get real clarity with one overarching authority?

It could be argued that we already have a central authority in place, through the formation of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) in 2018, which sits within the Financial Conduct Authority (FCA).

Following a year which has exposed the vulnerability of the property sector when it comes to money laundering and financial fraud, there is a clear opportunity in 2021 for OPBAS to really flex its muscles. It needs to establish itself as the central regulator, www.mortgageintroducer.com

implementing anrti-money laundering (AML) regulation are the same across the board: appointing an AML officer, implementing systems for ID verification, and having the latest software solutions, for example.

There is an urgent need for a solution to be put in place that can clear up the confusion and deliver clear messaging and guidance around AML processes, as the level of criminal activity continues to rise.

The first step should be to adopt the recommendation on electronic verification made in the Fifth EU Money Laundering Directive from the end of 2019.

This stipulates that, wherever possible, electronic verification methods should be used when undertaking due diligence and know your customer procedures.

It is time for the UK to take the lead on moving to electronic verification, by making this mandatory and shutting the door on dirty money. M I

responsible for driving out the criminal money washing through the banking and property markets.

However, OPBAS has a real challenge in the form of the number of trade associations doubling up as regulators for each sector it has to deal with. With some trade bodies also acting as regulators, can they all be truly independent watchdogs?

It would make more sense, and be much more transparent, for the trade bodies to exist in their capacity to support their members, but for OPBAS to act as the sole regulator, truly independent of all those sectors.

We know that nuances exist within each sector, but the principles of

It is time for the UK to shut the door on dirty money

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MORTGAGE INTRODUCER

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SPOTLIGHT

CONTACT STATE

Breaking the rule o Alain Desmier from Contact State discusses how scams are impacting the lead generation industry, and how to stay vigilant as new FCA regulation comes into force

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inding the best rates on the market can be as simple as a Google search. Type in a simple phrase such as ‘bad credit remortgage’ or ‘remortgage for unemployed’ and you’ll find websites quoting the best deals for a particular product. This can be helpful, particularly if you are looking for a rate in a hurry. However, not everything is always as it seems.

Unfortunately, some landing pages can be misleading, or even worse, might be actively impersonating a household name in order to attract interest.

This fraudulent activity becomes even more problematic because lead generation is not well understood by many – even the regulators have remained silent on the issue, until a recent consultation by the Financial Conduct Authority (FCA) unveiled that there is soon to be a new regulatory framework on financial promotions, which has been described as a “gamechanger” by experts in the field.

One such expert is Alain Desmier, founder of the award-winning Contact State. Contact State was founded in 2019 by Desmier and his business partner Mike Laming, and sets out to help companies “buy compliantly, profitably and confidently” from Europe’s best and most trusted lead generation firms.

Desmier and Laming saw a gap in the market, caused by the fact that many lead generation firms were using fraudulent tactics, such as misleading advertising and reselling consumer data.

Much of this behaviour was not mandated, meaning that large intermediaries and insurer partners were more at risk of being investigated by regulatory bodies, such as the Information Commissioner’s Office (ICO), regarding claims being made by lead generators.

Contact State has set out to break the rule of silence and introduce transparency into what is a complex and convoluted part of the market. Desmier spoke to Mortgage Introducer about how his business is bringing these dangerous practices into the spotlight.

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MORTGAGE INTRODUCER JANUARY 2021

THE ORIGINS OF CONTACT STATE Desmier’s career began at a Californian lead generation firm, with much of his experience being based in America. After four years, Desmier began a company with a business partner in 2011, which he describes as being a “classic lead gen” business, but which was directly authorised. This venture was successful, but after 15 years in lead generation, Desmier felt the need for a change.

He says: “I realised that everywhere in the world, there was this struggle between genuine lead generators and fraudulent ones, and similarly there were genuine and fraudulent buyers. It was almost impossible to determine which was which.”

This observation laid the foundations for Contact State. The business is integrated with both the sellers and buyers of leads, making it easier to work with ones that are legitimate, and giving everyone the tools to do their own due diligence on either side.

“One of my driving ambitions when I started this business was to be a helpful tool,” Desmier says.

“I saw a wave of regulation coming. We are seeing how privacy laws are changing even now, with consumers having much more control about what they share.”

Contact State aims to bring light to the significant amount of fraud going on in the lead generation space, and to raise the standard of lead generation as a whole, to the point where the regulatory requirements are as effective as they are for brokers, intermediaries and banks.

In time, Desmier states, this will lift the quality of financial advertising, and the consumer will easily be able to decipher the difference between a fraudulent lead and a legitimate one.

THE FCA’S APPROACH Thousands of mortgage businesses are currently buying leads with little understanding of where they are coming www.mortgageintroducer.com

SPOTLIGHT

CONTACT STATE

e of silence

Alain Desmier

www.mortgageintroducer.com

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SPOTLIGHT

CONTACT STATE from. In an attempt to combat this, the FCA last year revealed that it is changing the way that regulated firms approve financial promotions, making the buyer liable for the leads they obtain.

This, says Desmier, means that regulation begins at the first click of a lead, rather than later in the process, and will likely lead to swift ramifications.

“It is only a matter of time until a big mortgage business gets pulled up by the ICO for buying fraudulent leads, and gets fined for doing so,” he predicts.

This is different to the way regulation works in this field in America, which puts the onus on the source of the lead, and even allows for legal action if the consumer did not provide consent. Europe is set to follow suit and enforce similar regulations.

Putting the onus on the lead buyer instead might appear counter-intuitive, but Desmier explains that this area has been misunderstood by the regulator to date, and that this latest consultation is an attempt for the industry to regulate itself.

“This isn’t a bad idea,” he adds. “But what is most important here is for there to be a level playing field.

“If you are going to expect one sector to adhere to the rules – mortgage brokers, for example – you should expect the lead generators to also be directly authorised.”

This regulation is a step forward, but may not be completely necessary.

“You don’t need to take significant pieces of regulation to try and fix the current problems,” Desmier says. “What you need to do is change the way data is exchanged.

“When someone buys a lead from a lead generation website, they should understand that it complies with the [General Data Protection Regulation (GDPR)].”

VEIL OF SECRECY As a former lead generator who ran a directly authorised firm for eight years, Desmier understands the need for change more than most.

“A lot of thinking behind Contact State comes from the fact that I was a lead generator that tried to do things properly,” he says.

“We were the first directly authorised lead generation business, working with up to 2,000 mortgage brokers at one stage.

“From working internationally and across Europe, I found that there was almost an unwritten rule that fraud existed, but no one wanted to talk about it.”

To solve this, Desmier set out to create a level playing field and take down what he calls the “veil of secrecy.”

Unfortunately, fraud is simple. Desmier explains that one can simply buy a URL, build a website at low cost, put a Google advert up for the ‘cheapest remortgage rates’ and sell leads to a variety of regulated businesses. This can all be done with no checks or a required license.

“It is insane when we are talking about what is at stake,” Desmier argues. “What Contact State does is due

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diligence checks on lead generators that are interested in working with one of our clients.”

One of the most common scams around leads in the mortgage sector is tricking consumers into thinking they are buying into a well-known bank, with landing pages formatted to look exactly like the bank’s main website.

There is an argument to say that the big banks have a duty to monitor these websites and take action, but Desmier explains it is not that easy, as the fraudsters often sit off-shore.

He says: “They make it extremely difficult to shut these websites down, because they sit outside the UK’s jurisdiction. There is a vacuum that has appeared where even the big banks are unable to take action.”

It is this lack of transparency and inability to take action that will cause unsuspecting brokers to receive calls from the regulator in future. This, Desmier explains, is why staying alert and conducting the appropriate due diligence is becoming increasingly important.

THE FUTURE IN UNCERTAIN TIMES Contact State has been making a big impact in the insurance space, but Desmier believes that in this time of economic crisis, working with the lending market needs to be the business’ next step in 2021.

“We will begin to see an increasing amount of shortterm lending and distressed lending as an inevitable recession bites from COVID-19,” he says. “It is an obvious place for us to work.”

With plans to hire and expand its growing client base in 2021, it is set to be an interesting future for Contact State, particularly as the new regulation from the FCA is slated to be enforced in the next 12 months.

Desmier hopes that soon, hiring a lead generator will become as “meticulous a process as it is to hire a new member of staff.” M I

Alain Desmier’s top tips to avoid lead generation scams 1. Take time to do extra due diligence into the company directors 2. Work with directly authorised lead generation firms 3. Review the actual landing pages that will be used, and mystery shop the proposed customer journey 4. Invest in a lead generation contract that clarifies what you require in terms of customer consent and advertising 5. Work with a third-party certification platform to build a realtime audit of the leads you are buying

www.mortgageintroducer.com

THE OUTLAW

THE MONTH THAT WAS

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

THE THE

AND THE

Delia Smith: Let’s be avin’ ya, remainers

S

o, there we have it. A nice tranquil start to 2021, eh? We will address Lockdown Version III in a moment, as obviously it was a slightly newsworthy event, with some 17 million folk tuning in to listen to our after-dinner speaker. Sorry, I mean Prime Minister.

But to Brexit first, for whether you like the expression or not, there is no denying that Britain is thankfully a sovereign state once more.

Isn’t it just quirky how some folk who were originally arch-remainers now see it differently! Take the head of the Confederation of British Industry (CBI) for instance, Lord Bilimoria, who now views our independence as a springboard for recovery.

It’s a shame it took almost four years for some to realise that the un-elected Brussels elite would deliberately stymie every attempt to reach an agreement. But ultimately, standing up to the bully saw it back down. Sure, there will be some bumps in the road ahead, but if the two sides’ respective approaches to A) the vaccine’s roll-out and B) keeping cross-channel lorries on the road are anything to go by, I’d back Britain to do just fine.

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For our own world of mortgages, I’ve always vouched that the change will actually be negligible.

Certain London brokers are still crying into their cappuccinos, but in a sense COVID-19 has now subjugated the whole matter of Brexit.

Even the signing of more than 50 independent trade deals with other nations has received paltry press coverage. Liz Truss has done an exemplary job to-date – you might recall, of course, that back in July 2016 these croissant-munchers were telling us that the earth was going to fall in.

Well, it didn’t. Even when the most severe health crisis of our generation struck, the property market

JANUARY 2021

Toblerone: The shape of the recovery

performed resiliently, UK banks kept lending – by and large – and the stock market finished the year in rude health.

Boris has performed woefully throughout COVID-19, and he continues to be very much a bombastic and complacent cheerleader masquerading as a statesman. However, I don’t doubt his Pollyanna chutzpah, nor that the economy will indeed resuscitate throughout 2021.

Inclusive of which, the property market will do more than just OK. In an absurd fashion, the worse the pandemic gets, the more likely it is that Chancellor Rishi Sunak will extend the stamp duty timeline, and perhaps even offer up additional shots of adrenaline in his March budget, if not before.

There is going to be no cliffedge event in spring. Partly due to the now essential governmental interventions, but also because of two lesser reported facts.

For one, lest we forget, thousands of borrowers simply could not purchase or remortgage throughout 2020. Once the government’s support schemes end, and when most of these applicants’ jobs are confirmed as secure, there will be a fresh spate of applications.

Second, we may now see a second – and third?! – wave of COVID-fearing purchasers. These are folk who wanted to move last year, but didn’t for reasons relating to schooling, careers, relationships, employment conditions, and more.

These parents and grandparents will want to get ahead of any potential future variants of COVID-19 running wild, because there is nothing to say that this www.mortgageintroducer.com

Karen Cairney: Foot-in-mouth disease HSBC’s Pearson and Fenner: Processing millions before Lorraine Kelly’s even on set

awful affliction is going to be just a oncein-a-generation event.

If there is going to be a year in which the property market relapses by 10%, then it’s more likely to be 2022 than 2021.

Talking of relapses, this brings us neatly to our own regulator.

The phrase “X has had a good/bad COVID” has been used across all spectrums of life. Exemplars might include Rishi Sunak, the residents of Cornwall, shareholders in Amazon, and Leeds United FC, to name a few.

Those who had a year to very much forget included that imbecile Gavin Williamson, Jack Grealish, and Rita Ora. To that COVID-iotic list we can undoubtedly add the Financial Conduct Authority (FCA), for which the charge sheet is both long and damning.

First, when the government and lenders at large were encouraging financial support or payment holidays, the FCA sat on its hands at home and did nothing.

Then we had the publishing of the independent enquiry into the London Capital & Finance mini-bond misselling scandal, within which 14,000 bondholders and over → MORTGAGE INTRODUCER

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THE MONTH THAT WAS

£230m of investors’ funds were put at risk. This was called “wholly deficient” and possessing “significant gaps and weaknesses in its policies and practices.”

Following this, the Treasury Select Committee went further, citing a “litany of failings” at the FCA. This came hot on the heels of a separate report, which probed the regulator’s role in the collapse of the Connaught fund, suggesting that the regulator should have done more to protect consumers.

Conveniently for the FCA, most of these news stories appeared in the week before Christmas, and amid the new lockdown measures.

A FEW PERTINENT QUESTIONS Normally at this time of year, muppets like me play the role of 2010’s World Cup celebrity Paul the Octupus, making daft predictions about the year which follows. In the hopes of avoiding being lampooned, I will just ask a dozen or so pertinent questions regarding 2021: 1. Lloyds Bank scrapped all bonuses for staff last year, but did hint at awarding ‘recognition shares’ and above-inflation rises for those on lower salaries.

Halifax had a ‘good COVID-19’, but the corporate lending department dispensing Coronavirus Business Interruption Loans Scheme (CBILS) loans had an absolute nightmare nine months. How can two parts of an organisation perform so diversely?

2. Lewis Hamilton got a fawning knighthood, but for what exactly? Driving the fastest car, paying no UK tax, and virtue-signalling to us all at every turn?

Has there ever been a more rightly unloved winner of the SPOTY award?

3. On which subject, BBC’s SPOTY has now become a two-hour name-dropping, lecture-giving snore fest. Time for a complete reboot?

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Paul the Octopus: Knows far more than Shearer

4. Countrywide…Brexit’s impressive Lord Frost wasn’t the only one clearly burning the Christmas Eve oil! Have Connells got it at an absolute snip?

And my, didn’t COVID-19 end up saving its bacon?

The ironies of pandemics!

5. Talking of ironies and strange happenings: Liverpool will win the league again. It apparently “means more” to the fans and owners there, but is this the same ownership who preside over one of the wealthiest clubs on the planet, and yet who back in the spring applied for government furlough cash?

6. There were £23.2bn-worth of mortgage completions in November. Brokers shouldn’t be brassic in January, but the key now will be surveyors.

Do the omens appear positive that – PPE permitting – these two months should be business as usual, with lenders being supportive around desktop and automated valuation model (AVM) technology?

7. On TV sports pundits, Will Alan ‘Arsenal could be relegated’ Shearer continue to be the dullest ‘expert’ on Match of the Day, and might Karen Cairney and some of her fellow female ‘analysts’ soon be cured of their rampant foot-in-mouth disease? According to the experienced Cairney, Leeds United only won the championship by a whopping 10 points last season because of the COVID-19 break! Lazy journalism from both of these.

8. There is apparently over £100bn in consumers’ accounts earmarked for a post-COVID spending splurge. Rishi’s hopeful recovery was ’W’ shaped. I sense it may now be Toblerone shaped – and yes, I have patented that analogy already!

9. Is The Crown the most cringe-worthy thing on Netflix right now? I accept that Maj, Anne and The Cambridges do a great job, but I’m no royalist, and even though the Culture Secretary Oliver Dowden was protecting his place in a future Honours list by suggesting that the show should have a fiction disclaimer, I think it’s fitting that Netflix has used such poetic licence, as most of the royals are dysfunctional, workshy laggards. I can’t wait for the next one, and Andrew’s non-sweating comeuppance!

10. Who will win the Euro 2021? Not England, with that immature excuse for a goalie, Jordan Pickford.

11. Whisper it, but could 2021 be even better than 2020 for mortgage applications? We are anecdotally already seeing folk who perhaps weren’t minded to move until 2022 or 2023 viewing properties – thankfully not forbidden under lockdown. Surely, the stamp duty concession will now have to be extended into summer? Estate agents could be busy, which brings me on to an important apology.

12. In last month’s article I clumsily alluded to the possibility that some mortgage networks were complacent – or complicit – in allowing some of their mortgage brokers sat within estate agencies to flout the code of conduct around conditional offers, suggesting that supervision and levels of oversight www.mortgageintroducer.com

were sub-optimal. What I should have written was that it was only certain estate agents who were flouting their own code of conduct, and not mortgage networks.

For that, I duly apologise to some of my colleagues. This remains a timely matter for The Outlaw – and readers at large – as in the past four weeks there have been no fewer than three well written trade pieces about this, and the latest one from PropertyMark actually called for tighter regulation of the sector.

This will be worth watching in 2021, as it is undoubtedly a sector which needs it more red tape, and not less.

This brings us neatly back to Brexit.

At this point I could borrow a wellused line from the famous Norwegian commentator Bjorge Lillelian: I could suggest to some that they took one helluva beating. Amongst others, John ‘captain of the B team’ Major, Delia ‘let’s be’avin ya’ Smith, Hugh

Steve Coogan: Staff on furlough

Grant, Steve ‘I’ll furlough my gardener’ Coogan, and Benedict Cumberbatch.

Many Brexiteers were accused of being myopic racists, yet most were originally content to accept any democratic outcome. In a peculiar twist, it is now the political liberal elite which is coming across as patronising and arrogant.

So, here’s my final word on Brexit for a few months.

Did you know that last year the EU produced a list of its ‘Top 20 Achievements’ between 2014 and 2019? Incredibly, the only things on this list which were unambiguously pro-consumer in the UK were the ending of roaming charges for mobile phones and signing trade deals with Canada and Japan – which have both subsequently agreed deals with the UK. We should all be asking the FCA to draw up the same kind of list. Let alone 20, do you think it would get beyond two? It’s about time more financial advisers found their voices and held the regulator to far greater account for the £700m spent on it every year, by you the tax-paying reader!

But as ever with civil servants ensconced in a comfort zone, nothing ever really changes does it?

The departure of Cummings – who was building a bonfire for these inefficient vanities – will only ensure that the cosy status quo is retained.

Great work, if you can get it! M I

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FEATURE

COVER

STATE of the NATION Just Mortgages team members from across both the business and the country discuss their 2020 stories, and their hopes for the year ahead MI

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www.mortgageintroducer.com

FEATURE

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John Phillips national operations director, Just Mortgages

G

iven the year that we have all had, Just Mortgages has done remarkably well. It has been incredibly difficult at times, particularly during the first lockdown when we had to make the very tough decision to furlough some staff, but we have come back incredibly strong.

The stories that follow reflect individual journeys from members of the Just Mortgages team all around the UK. For the first time, we have not only spoken to mortgage brokers, but also regional directors, members both of compliance and our telephone-based customers services teams, to reflect the experiences of people from across the business. Despite this, the themes are remarkably similar.

I am so pleased with and proud of the whole team. Despite it being tough, and despite all the changes that we have all had to undertake, the way people have worked has been unbelievable. All parts of the business have done well. The employed broker business based in estate agencies has held up remarkably, while telephonebased customer services team and our new-build division are also both flourishing.

What has been most remarkable, however, is the growth of our self-employed broker division. We started the year with 250 brokers and we end it on 345. Even in these uncertain times there are a growing number of mortgage brokers who want to be self-employed, particularly under a framework like Just Mortgages, where they can operate their own business but continue to receive help, support and training.

Many are experienced brokers leaving corporates as they no longer want to be hounded every hour being asked how many people they have spoken to. Nevertheless, we are also seeing a lot of organic growth, as many self-employed brokers who joined us a year or two ago are already so busy they are taking staff on.

In general, the independent brokers who have been able to adapt to being remote are flourishing, as they are in a prime position to mop up the business that would normally go to the high street.

Looking ahead, I think 2021 will be OK. There will be an impetus at the start of the year, but how that continues may well depend on how quickly the vaccine is rolled out. There is the end of the stamp duty holiday, of course, but while there may be a slight wobble for a while, I think the market will hold up.

We are definitely in for the continuation of video meetings – I believe that will be here to stay now everyone has got used to it.

While there will be some travel once it is safe to do so, I don’t think we will go back to travelling around the country as we used to.

Finally, the client servicing piece will get even bigger, and it will be more important than ever to keep in touch with those existing clients. M I

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Ben Allkins Regional financial services director – self-employed division Location: Midlands and South West

Helen Whitehead New-build mortgage specialist Location: Northamptonshire Last year started in normal fashion, but as the lockdown hit, business fell off a cliff. In the new-build arena, we had confusion around whether construction sites could stay open. In the end, everything ground to a halt.

Once the market reopened, the floodgates opened too. In July last year I recorded the most business I’ve ever conducted. We shifted meetings to video, and despite some initial nervousness as I’m a bit of a technophobe, it has proved to be an effective way of working. I’m a big fan of face-to-face meetings, and although it is not the same, video conferencing has been an effective way of advising. I’ve been offering clients the option now, and most have been choosing to meet virtually.

The Help to Buy scheme being adapted at the end of 2020 will certainly have a huge impact on the market over the next year. We are heading to a perfect storm of the stamp duty holiday ending, Help to Buy changing and the end of the furlough scheme at the end of March, which will certainly impact the market.

Overall, 2020 has been a strange year and not one I’d like to repeat! I’m looking forward to getting back to normal at some po int this year.

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The pandemic had such a huge impact on every aspect of our lives, but equally, the impact on the way we work was immeasurable.

Last year was unlike any other; I started 2020 with 58 advisers in my region and, through continuous recruitment, by December I had 82.

The challenge has not been attracting candidates, it was changing our processes, and quickly.

Remote recruitment and training took a bit of getting used to, and never getting to meet a candidate in person was challenging, but we now have all those processes in place.

Our advisers are, by default, home workers, but as our proposition is built on the support we provide, it was the way we work through the mortgage process that had to change. For instance, electronic ID existed but wasn’t widely used, because it wasn’t vital. Now, it is standard practice, and we have made similar changes throughout the mortgage application process.

2020 has given us time to pause and think about the way we work. I believe our processes have changed forever, and we are a better business for it.

It’s going to be a hectic start to 2021, but who knows what we’ll be looking back on this time next year?

Kristy Walsh Employed division Location: Ipswich Who could have imagined, when I was taking part in this article last year, the tumultuous year we were heading into?

It was a busy start to the year, and even through the first lockdown I stayed busy, just in a slightly different way. Although the housing market was effectively shut down, there were plenty of mortgages in the pipeline and a lot of very worried clients that needed reassuring. There was a fear that their mortgage applications would not go through, and it was my job to ensure everyone knew what was happening throughout.

Adjusting to the virtual world when I have always worked face-to-face with clients was quite difficult, but we adapted quickly. It does give more freedom to react whenever the client needs it.

There were plenty of remortgages at that time, but as soon as the restrictions were lifted and the stamp duty holiday was announced, the market took off like a rocket.

Even though things are still uncertain, I am positive about 2021. We got through 2020, so I’m sure we can get through anything this year. People are always going to need mortgages, and the best thing for me is seeing my clients through the journey from application to the day they get their keys.

www.mortgageintroducer.com

FEATURE

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Mike Peet Divisional sales director Location: West Midlands, M1 and Middlesex

Liz Robertson Head of FS administration Location: Sheffield Heading a team of mortgage administrators who usually work in a large office has been different and, at times, challenging.

I have five team leaders above 20 administrators who had to adapt to working from home last year.

Although we work remotely from the advisers we help, we do work as a team.

We were well supported by the company and our IT department as we adjusted. We picked up our desktops and phones and, with explicit guides, were quickly up and running.

For me it worked perfectly. As a team, we kept in touch and supported each other throughout.

A large proportion of the team was furloughed in the first lockdown, but once the restrictions were lifted we were back to full strength, and ever since it has been incredibly busy.

As the head of department, it was difficult not hearing people working.

Listening to calls helps assess what training they need, or what experience others could provide to help get cases through.

With many furloughed across the industry, or in quarantine, the mortgage process has taken much longer recently. I’m hoping that we can get back into the office as early as possible this year, so we can concentrate on getting timings down and interact again. We’ve all missed that.

www.mortgageintroducer.com

Liz Yates Head of compliance Location: Sheffield For many reasons, thankfully not all of them bad, 2020 was a year we won’t forget in a hurry. From a compliance point of view, with everyone working from home there were a lot of changes.

We reacted quickly when we went into lockdown, with many new processes to support our advisers. We had more advisers coming onboard as Just Mortgages continued to recruit throughout the year, and as a result, the compliance department will be growing next year.

There was an increase in application fraud, as lenders were much tougher, especially on the self-employed and those who were furloughed. Many of our advisers have never worked in this type of market before, so training and support was vital.

We all continue to work remotely, and it has made me question the way we work and recruit. We have coped so well in the virtual world, why would we stop now? Do we really need to be driving all over the country? It’s important on occasion to meet face-to-face, but moving forward we will also be looking to recruit in the regions to provide support to advisers across the country.

As for 2021, I think my position is one of optimism and apprehension, but mostly optimism.

You could call 2020 a baptism of fire.

When the pandemic shut the market down, I was looking after the M1 division, but as things progressed the business had to adapt, and unfortunately some staff were furloughed.

This meant that we had to pick up bigger divisions with more advisers, and the goalposts kept moving.

Despite the virus, it was an incredibly busy year, and one in which I learned more than I otherwise might have in the space of three years.

Our advisers, who normally work in-branch, were thrust into working from home. For many it’s a change they would rather not repeat, and they can’t wait to get back into the office. For others, it was a sea change and their working lives will never be the same.

As a company, we now see the value in advisers having more freedom to work from home. If they are performing well there is no reason for them to be permanently tied to a branch.

We are all stronger now, and I am excited for what is to come. Lenders are coming back with 90% loan-tovalue (LTV) products and, hopefully, it won’t be long before the return of 95%. There will be challenges, but we’re expecting another good year.

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Rodney Sloan Head of training Location: Peterborough

Richard Mills Area director – South East – self-employed division Location: Surrey In the self-employed division, we had an incredibly busy 2020. While there have been issues around lenders understandably changing criteria to meet the ever-evolving circumstances, brokers have been fantastic in rising to these challenges and have serviced their clients brilliantly.

The self-employed team were wellplaced to adapt to the situation caused by lockdown. Many were already homebased, the main challenge was adapting to video calls. Just Mortgages has been really supportive, ensuring that each self-employed broker had the training they needed to get to grips with this.

With video conferencing proving to be an efficient way of working, even post-pandemic, we may see a substantial amount of contact with clients moving towards video. This is a move that would have been unthinkable at the start of last year.

Thanks to the great support Just Mortgages offers its team, and a growth in brokers looking for more autonomy, the self-employed division thrived last year. We have grown to more than 340 brokers and are still inundated with applications to join.

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In 2020, I was conscious of the pressures of remote working and the impact this could have on employee wellbeing. From an early stage, we utilised our learning management system (LMS). During the first national lockdown, we put together a programme called ‘Staying Connected.’ We produced non-work orientated material to help our employees feel supported at a time when it would have been easy to feel disconnected from colleagues.

Engagement statistics told us that our employees were receptive of this system and we received lots of positive feedback. This year, we have been able to conduct a larger number of one-to-one development sessions. With video conferencing, we were able to curate a time-effective system where we were able to adapt our business model and offer more individual coaching.

I am incredibly proud of the way my team has risen to the challenges presented this year. Everyone is aware that we are in difficult market conditions and a tough trading environment. The big question in 2021 will be how we can manage to mix the face-to-face engagement with remote engagement? Undoubtedly, a large part of our engagement will be transacted remotely, however there is a balance to be had. There is a lot still to be said for face-to-face contact with people, as this is when you build rapport and relationships.

Maddie Asif Employed division Location: Stoke-on-Trent During these challenging times, a saving grace was the support of my colleagues.

I think many people across the country faced mental health issues in 2020 – especially what with being isolated at home for such a substantial amount of time – and knowing I had a supportive team made the world of difference.

When we went into lockdown, I had to adapt to different customer needs and become a ‘Jack of all trades’ overnight.

I was doing everything from giving clients IT lessons and providing additional support to less tech-savvy customers, to taking on the role of a negotiator, on top of my usual daily activities.

Some of my customers did not have an email address, so I walked them through the entire process, which inevitably caused delays in the day-to-day side of my role.

As we look forward, maintaining customer relationships and being proactive in keeping channels of communication open between broker and customer is more important than ever. These are challenging times for many, and having someone to talk to about mortgage or protection concerns is imperative. I think we will see increased demand in the protection market in 2021.

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FEATURE

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Kelly Powers New-build broker Location: Leeds

Ryan Lewis Employed division Location: Cardiff

I saw significant changes in my business model because of the pandemic. All my business had to be conducted remotely, and one of the biggest operational challenges for me was getting used to the ‘Zoom’ way of working.

However, I quickly adapted to the virtual new normal, and it enabled me to increase productivity and focus on other areas of my business.

Because I was not traveling from site to site, I saved time and could therefore process a lot more business and help more people.

The main delay I experienced in 2020 was down to mortgage lender capacity, because they faced challenges in keeping up with the demand of new applications due to COVID-related restrictions. Clients appreciate honesty, and by being fully transparent with them from the outset about potential delays, I managed expectations and limited the likelihood of frustrations further down the line. Because of that, I am proud to say that all my customers remained happy from the beginning of the process, through to completion.

Social media proved to be a brilliant tool. As face-to-face contact was limited, more people naturally went online and I gained a multitude of new clients through these channels.

One thing that was made crystal clear in 2020 was that confidence in brokers is incredibly important.

People rely on us – when someone has contact with a broker, they are guided through the whole process.

The knowledge we have on lenders and criteria means that we can place customers with the right lenders for them, and save them time, which is now more beneficial to customers than ever before.

I saw an increase in gifted deposits from the ‘bank of mum and dad’ in 2020, which is likely a result of people reassessing their long-term living situations, coupled with the restricted number of high LTVs on the market.

It is important to be there for your clients when times are stressful, as it gives you an opportunity to show them that they can depend on you when times are tough. In the long run, it will strengthen relationships.

We do not yet know how Brexit is going to impact the housing market, but if we learned anything from 2020, it was that as brokers, we need to be able to adapt to change in order to succeed.

www.mortgageintroducer.com

Peter Grout Employed division Location: Stevenage 2020 was probably the most difficult and the most rewarding year to be a broker. The difficulties have been well documented with everyone having to adapt to new working practices and the challenges that caused. But the rewards have been that we have helped a huge number of people find a new home.

Probably the most important change last year has been the shift to home-working. Having been based in an estate agency, the move to home has had its issues initially. Not having to commute two hours meant I could use that time to support more clients.

While tech can sometimes be tricky with internet connections dropping at the worst time, the process has been smooth overall. Clients are getting used to communicating virtually and even once we are free to meet in person, the accessibility of video conferencing means I will continue to use it where possible.

The pandemic has brought a focus onto protection for clients. There has been a slight increase in understanding and interest in protection. This is something I see continuing into 2021 as people consider ensuring that they are covered should the worst happen.

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FEATURE

COVER

David Spencer New-build division Location: South Midlands

Lara Falade Employed division Location: South London Last year started really, really well. In January I did double the business of December 2019. I mainly operate in the residential market, with a bit of buy-to-let, and last year was moving in a positive direction until the lockdown in March. Things didn’t completely stop, but the majority of business dried up.

In April 2020, lenders began to pull products and amend criteria. This was the biggest challenge for me last year.

In some cases, lenders took months to respond to an application, only to then reject the client. The lenders became risk averse and started upping rates with no warning. I work with a lot of first-time buyers, and the high LTV products that they favour were only on the market for days at the most.

To counter this issue, I have been asking my clients a lot more screening questions and upping the level of analysis on their circumstances to ensure they have as good a chance as possible to be successful in an application. This is particularly true for those who are self-employed or on furlough.

Working from home was tough last year, and I hope to be back in the office soon!

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Last year was a tale of two halves; it wasn’t quite the busiest ever due to the lull through March, April and May, but the last six months certainly made up for the quieter period. The new build market performed well, and the only issue I had was with lenders’ service levels. Overall, by being open with clients about potential hold-ups, the year has been a good one.

I’ve always been based at home, so adapting to the lockdown wasn’t the most difficult for me. The pandemic actually helped streamline my processes. Whereas previously I would drive an hour each way to meet a client, I can now achieve the same results with a video call. It also means I can immediately action what we agree.

While I miss the human connection of meeting in person, video calls do have the advantage of getting the client’s full attention!

Looking ahead to how my working practices will shift, I’m hoping for a hybrid of face-to-face and virtual meetings. Ideally, the first meeting will still be in person and we can make a personal connection. Then the second follow-up meeting can be conducted virtually and I can share my screen to talk the client through their options.

Emma Szabo Employed division Location: Kent The underlying root of my success in 2020 was the strong relationships I built with my branch colleagues and the continued support they gave me.

Because of this, we all managed to cope well considering the circumstances we faced.

A positive element of remote working was being able to maintain our ‘old school’ home visits. Video calls allowed customers to continue having appointments in the comfort of their own homes, the only difference being that I was in my home, and my customers were in theirs.

From the moment the Chancellor announced the stamp duty holiday, there was a large surge in people wanting to move home. The stamp duty holiday played a substantial part in the demand we witnessed, and arguably kept the market afloat. I saw a particular spike in customers who had planned to move within the next few years and decided to bring those transactions forward to save money.

Drastic taxation changes, especially those surrounding buy-to-let or second properties, as well as the wider uncertainty around COVID-19, Brexit and their bearing on the economy, could impact business in 2021. The underlying message to take away from 2020 is that building relationships is key, and with support and teamwork we can overcome these challenges together.

www.mortgageintroducer.com

Part of the Mortgage Introducer family. @MortgageChat | Mortgageintroducer.com

I

To appear in the next issue of Bridging Introducer, contact us today.

Maa Bond Commercial Director Maa@mortgageintroducer.com 07525 456869

LOAN INTRODUCER

SPOTLIGHT

Fluent in five Loan Introducer chats to Tim Wheeldon, chief operating officer at Fluent Money, about his life in the fast lane and his hopes for the second charge mortgage market How has the COVID-19 crisis impacted your business?

The Fluent Money Group has been impacted by the crisis in a more limited way than we would have imagined back in March 2020.

We have been fortunate, in that our business continuity strategy meant that we were able to pivot to homeworking in a matter of days, and we went from 320 staff working from our base in Bolton to 300 people working from home.

The impact on the business from a market perspective has also been lower than we had feared. While the homebuying market has been adversely affected during the pandemic, our lending volumes were only marginally affected. In the second charge market there has been a larger dip in lending, with some lenders withdrawing Tim Wheeldon

products or from the market completely, but thanks to the lenders which remained, the effect on our volumes has been limited.

We have come out the other side of the global pandemic with a full complement of staff and no redundancies.

Have you seen any change in the reasons borrowers need a second charge?

There has been no discernible change in why customers are borrowing. We are seeing the same mix of reasons – predominantly for home improvements and some debt consolidation.

How is technology likely to help, or even change the market, going forward?

The second charge sector is already ahead of the first charge market with its use of technology; from both a lender and intermediary perspective. Brokers such as ourselves and third-party providers like Nivo are developing integrations aimed at reducing transactional friction, and this will help to make the market more efficient.

Are enough first charge mortgage brokers aware of and advising on second charges?

Very few first charge brokers have embraced second charges and are actively advising or referring these products. Training and educating the first charge market will help, but the biggest barrier to referrals is that of inertia – many brokers simply do not want or need the perceived hassle of referring or even transacting a second charge, and prefer to hold onto their client rather than refer to a specialist.

Is the second charge market achieving the business volumes it is capable of?

The second charge market is not achieving the business volumes it is capable of, because of the effects of the pandemic on the wider economy, and specifically its impact on the employment market, which is making it harder for lenders to predict risk.

What are your hopes for the market in 2021?

That the arrival of the COVID-19 vaccine will hopefully allow life to return to a version of normality during 2021. M I

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www.mortgageintroducer.com

“The impact on the business from a market perspective has been lower than we had feared. While the homebuying market has been adversely affected during the pandemic, our lending volumes were only marginally affected”

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

I gained a place at Warwick University reading physics and electrical engineering, and was hoping to get into the engineering side of particle physics. I then had a change of heart and went into financial services instead.

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

I used to be a racing driver, originally in Formula Palmer Audi – in cars similar to F3 – and then endurance racing in the Fun Cup Series, where I enjoyed one championship win, one second place and one third place in the championship in six years, plus 30-odd wins and podiums. I also achieved a victory in the 25-hours at Spa as well. During this period, I raced in a GT series in the UK and Europe in LMP-styled cars.

I retired two years ago, though I may return in a year or two.

What music are you listening to?

Since the Christmas classics have come to an end, I’m back listening to Pink Floyd.

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

Some advice can be flowery, vague or vacuous, so when you spot a good example, “take it in and pass it on.”

www.mortgageintroducer.com

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SECOND OPINION

Under the micro s Loan Introducer asks what the FCA can expect to find in its 2021 review of the second charge market

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uch remains unknown when it comes to 2021, but one certainty is that the regulator will look again at the practices of those in the second charge mortgage market.

Towards the end of October 2020, the Financial Conduct Authority (FCA) wrote a ‘Dear CEO’ letter to firms operating in the sector, outlining its concerns.

The letter identified both second charge and lifetime mortgages as markets that could cause potential harm to consumers.

It highlighted the fact that second charge brokers generally serve customers who may be less able to access mortgages from their existing lender or the mainstream market, and hence may require a second charge mortgage to raise funds for debt consolidation or home improvements. The FCA intends to review a sample of firms’ advice to consider whether it was suitable; namely, that the product met the borrower’s needs and that they were treated fairly throughout the process and understood the product.

It will also consider how the fees and charges are described to the customer, and whether these may be considered excessive.

So, Loan Introducer asks: “Does the sector have anything to worry about, and do you expect the FCA to find any wrongdoing?”

B u s tTolfree e r To l f r e e , Buster

commercial director commercial director – mortgages, United Trust mortgages, Bank: United Trust Bank It is a possibility, I don’t think there is any industry or product where improvements cannot be made. As a lender, we choose carefully who we work with to ensure that brokers share our commitment to doing right by the customer.

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Jeffrey List director, Specialist Money I do not think we’ll see any systemic risk, as most brokers are acting compliantly. Having said that, I wouldn’t be surprised if there was a further tightening of the advice process and fee charging structure in the second charge mortgage market to make sure the client is receiving the best and fairest outcome.

As brokers, we should be considering and offering the options for both a remortgage and a second charge on all occasions where capital is being raised for debt consolidation or home improvement purposes. Many brokers still ignore the second charge option and will default to advising on a remortgage option only, as there may not be a complete understanding of the second charge products and processes.

The advice provided should always take into account the impact of any early repayment charge (ERC) on the existing first charge mortgage, the cost or savings to the borrower over the term, and of course the impact of wrapping unsecured debt in to a longer term secured facility. There has always been a disparity with regards to fees charged to the client by the broker and the charging of fees is of course allowed for the services being offered; the key to this is that the fee is seen to be fair to the client.

Tim Wheeldon chief operating officer, Fluent Money The sector successfully adopted FCA mortgage regulation back in March 2016, and follows the same rules as the first charge

JANUARY 2021

mortgage market. The other intermediary firms I speak to have embraced the new regulation, so I see no global issues with the FCA’s planned work for 2021.

Alistair Ewing owner, The Lending Channel Every industry has people that operate outside what would be deemed reasonable boundaries, but I do believe that the majority of second charge firms have the best interest of their clients at the heart of their advice.

High fees alone do not constitute bad advice, providing they have been properly discussed with and disclosed to the client.

How reasonable a high fee is will depend on the amount of work involved in a case, but I do think lenders, brokers and the regulator could all work harder to come up with a better maximum fee structure for seconds, whilst ensuring this would work commercially for all stakeholders. Debt consolidation has always been a higher risk area of lending, but given the regulation and controls our industry has had since regulation was introduced, I am not aware of much wrongdoing here.

Matt Tristram co-founder, Loans Warehouse The second charge industry is still relatively new to FCA regulation, so I’m sure there will be some learnings from its review, but I do not foresee any call for wholesale changes or accusations of wrongdoing.

The majority of second charge mortgages are completed through specialist brokers and a select number of lenders; they are therefore www.mortgageintroducer.com

LOAN INTRODUCER

SECOND OPINION

o scope well run and all focused on achieving the best outcome. The rumour mill will of course run, and there will be certain corners seeking to gain a headline from speculation, but all guidance is good and the industry will continue to learn and grow.

charging a fee of £2,000? In my opinion, that would be excessive.

To what extent the industry does this, I don’t know. But my guess is that this is ubiquitous, hence the regulator wanting to investigate this year.

Barney Drake

Rob Jupp

chief operating officer, Specialist Mortgage Group

chief executive officer, The Brightstar Group

Our understanding is that firms must identify the costs of consolidating previously unsecured debt into a secured product, for each and every line of credit. If the cost is greater, then the adviser must consider whether it’s appropriate to consolidate – based on the customer’s needs and circumstances.

We all have customers who are shopping around and have seen many cases where no such consideration has been made. It’s a case that the adviser has simply quoted the monthly saving to the customer, rather than analysing the costs. Whether or not the regulator is satisfied with the work such firms have carried out would be a decision for the regulator to make. But I doubt they would be satisfied.

Regarding fees, I think charging fees where suitable advice has not been provided will be the issue here. If a firm has charged a fee of say, £2,000, but has given options for the customer to then decide which term or what items they want to consolidate – whether they want fixed or variable, for example – then my understanding is that the firm has not provided advice. It has merely given the options and placed the emphasis on the customer to decide, as opposed to taking full accountability for providing suitable advice.

Asking the customer to decide which option is best for them, in my opinion, is not advice. So, how can a firm then justify www.mortgageintroducer.com

It’s worth remembering that it’s the job of a regulator to oversee and investigate the markets that it regulates to ensure high standards are being upheld – so a review by the FCA shouldn’t provide any cause for concern, it’s simply business as usual.

The regulator may well find incidents where the advice process has not been up to scratch or fees are deemed to be excessive, but it will also find a lot of examples of excellent consumer outcomes and very good practice by firms.

Both the first and second charge lending are on a level regulatory playing field, subject to the same amount of scrutiny and the same high expectations, and if an FCA review of the second charge market provides a reminder to brokers of this, then it can only be a good thing.

Simon Mules commercial director, Optimum Credit The FCA has regulated the second charge market for more than four years now, and part of its role is to review a market to ensure that all participants are upholding the same high standards. There is naturally a chance that it may find that some participants are not meeting those standards, just as it might in any market, but this is one of the benefits of statutory regulation, and processes like this give greater confidence to intermediaries and customers.

Marie Grundy sales director, West One Loans

Fiona Hoyle head of consumer and mortgage finance, FLA At this point, the FCA has not set out much detail on exactly what it will be looking at in the second charge sector, or how it will go about it. We remain in close contact with the regulator and will work with it once it formalises its approach.

As this piece of work is not expected to start for some time, it’s difficult to pre-empt the potential outcome of the report. Knowing the second charge broker community as I do, however, it will want to fully co-operate with the FCA and address the areas of focus outlined in the recent ‘Dear CEO’ letter, as well as act on any learnings identified as part of this review. M I

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“Ve ea asp que om

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FEATURE

The road to reco Natalie Thomas looks at why there are still plenty of reasons for advisers to be optimistic in 2021

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ust 12 months ago the second charge mortgage market was riding high, on track for a growth in lending and enquiries – then the pandemic hit.

Nevertheless, as the market moves into 2021 there are signs that it is on the road to recovery.

Having seen year-on-year new business volumes fall by a colossal 80% in May, the market rebounded to a drop of just 35% in October, figures from the Finance & Leasing Association (FLA) show.

As a new market emerges, many brokers have their own wishlists as to what they would like to see done differently in 2021. This might be greater involvement from the first charge industry, an updated application process, or a wider variety of products.

SHORT-TERM PROBLEMS Before the market can focus on issues such as technology and broker awareness, it will have to tackle some existing difficulties.

Once applications for mortgage holiday payments come to an end in March, this will hopefully free up lenders’ capacity and address service delays.

Barney Drake, chief operating officer at Specialist Mortgage Group, says: “A challenge from a packaging firm’s perspective has been lenders’ service standards, which is completely understandable given the forbearance requirements imposed on them with little to no notice.

“We must all be respectful that such an unprecedented workload and scale of challenge has caused significant stress and strain for our lenders.

I applaud how so many have adapted so quickly.

“Although 2020 has been a challenge for us all, it has also given us an opportunity to reflect on our business, goals and aspirations for the future.”

Coupled with the closing of applications for mortgage payment deferrals is the end of the stamp duty holiday on 31 March. Although the initiative has fuelled vast demand in the first charge market, it has perhaps had the opposite effect on the second charge market, by dampening demand among those looking to stay put and take out a second charge for home improvements.

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Simon Mules, commercial director at second charge lender Optimum Credit, says: “There’s every chance that we’ll see an increase in demand. As both the market and economy recover, and with the likelihood that the stamp duty thresholds return, we may see more people improving their homes as opposed to moving.”

Nevertheless, a market recovery will not happen overnight, and it will perhaps be the latter half of the year by the time the sector starts to see some return to normality.

Jeff List, director of Specialist Money, says: “I cannot see a huge change in the second charge market in the first part of 2021, and of course this could be the case until we see an end to the ongoing pandemic and the economic situation settles.

“I hope we will see some stability in the second half of the year, with lenders returning to somewhere near their pre-COVID product offerings and criteria.”

A MOVE INTO THE DIGITAL ERA There are many in the industry hoping that, once the market stabilises to a reasonable extent, lenders in both the first and second charge mortgage markets will prioritise a move to a more digital application process.

“A wish for 2021 would be to see an improvement in technology that allows for a simpler journey for the client, the broker and the lender,” says List.

“There are still parts of the process that are archaic, the worst part potentially being the process of obtaining second charge consent or a building society questionnaire from the existing first charge lender.

“Many banks and lenders still request the consent be sent by post or fax, and where a payment for the request is needed, a cheque is to be sent.

“This way of working can add days and potentially weeks to the application process. By simply utilising email and card payment facilities, the process could be streamlined and made much quicker. Ideally, systems could be created that completely automate the process.”

Alistair Ewing, managing director at The Lending Channel, agrees: “In 2021, I would like to see lenders www.mortgageintroducer.com

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FEATURE

covery continue to make better use of technology. The second charge lending process is still very paper-based, with wet signatures being required a lot.

“Open banking is beginning to be used in some areas of lending, but could be used much more for second charges. Digital ID has begun to be accepted with lenders like United Trust Bank, for example, but could be used more.”

Buster Tolfree, commercial director of mortgages at United Trust Bank, says if the bank had not invested so much in developing and implementing fintech in 2019, its 2020 would have looked very different.

He is optimistic about the direction the second charge mortgage industry is heading.

“We’re excited about the increased momentum in fintech in the sector, and the very positive impacts it can have on customer and broker experiences, efficiency, conversions and successful customer outcomes,” he says.

“We all know that speed is one of the key factors in successfully delivering a case from application to completion, so if technology and digitisation can hasten that process without having an adverse effect on the lender, broker and customer relationship, data security, or the quality of the service and experience, then I for one am all for it.”

INCREASED AWARENESS AND PRODUCTS Another likely offshoot of a reignited market could be a bigger product selection.

“Although there are lenders offering products in the higher [loan-to-value (LTV)] bands, it would be good to see additional lenders return in this space,” says List.

“This would enable us to help more clients who are looking to add value to their properties with home improvements being completed.”

Matt Tristram, co-founder of Loans Warehouse, says that his primary wish for 2021 centres around product variety, particularly when it comes to buy-tolet (BTL) properties.

“There is currently a limited supply [of BTL] from a handful of lenders,” he explains. “Rates are often significantly higher than on residential properties, and they aren’t offered by the industry’s mainstay lenders.”

Marie Grundy, managing director of second charges at West One, says the lender’s priority going into 2021 is to continue to support broker firms and help the sector maintain its recent strong growth trajectory. www.mortgageintroducer.com

New products will be part of this, but like many in the industry, Grundy also feels that there is still a lack of recognition of second charges from some corners of the first charge market.

“There will undoubtedly be the introduction of more competitive-based pricing, but there is still a big gap in awareness of how second charges are not just for borrowers who are less able to access mainstream finance,” she says.

“We recently introduced criteria into our second charge range to support ‘bank of mum and dad’ transactions, and I would like to see greater innovation from the market to make seconds more relevant to a wider range of borrowers and mortgage intermediaries, where this will deliver better consumer outcomes.”

Tolfree would like to see a review of the mortgage advice regulation which makes it viable for an adviser to simply opt out of considering second charge products as part of the range of options available to their client.

He says: “Seconds aren’t suitable in all instances, just like a remortgage won’t be, but there are a variety of scenarios where a competitive second charge may be a more favourable option than a remortgage or a further advance. Unfortunately, if the customer goes to an introducer who has opted out of giving advice on second charge products, they won’t be presented with the second charge option – or vice versa for a remortgage – and that’s wrong in my view.”

Rob Jupp, chief executive officer at The Brightstar Group, is of similar thinking: “Quite simply, I’d like to see more brokers engage with the sector. At Brightstar we recently carried out extensive research, which found that three-quarters of brokers don’t talk to their clients about second charge mortgages.

“The good news is this means that three-quarters of brokers now have a great opportunity to boost their business levels as we move into a new year.

The purchase market may be likely to slow down in 2021, but the second charge mortgage market is set for growth as demand increases from customers who want to release capital from their home.”

Gavin Seaholme, head of sales at Shawbrook Bank, is positive about the year ahead, but agrees that further education is still needed.

He says: “Looking ahead to 2021, a real focus is needed on the second charge market, with further education required to demonstrate how it is as important as the first charge market. Hopefully, employment will remain strong with the vaccine now in reach, and consumers will look at utilising a second charge loan as an alternative option to the traditional remortgage.”

Seaholme concludes: “The market has had a turbulent 2020, but with continued support from brokers, partners and lenders, and with product innovation and tech enhancements, I’m confident that the market will recover and see growth.” M I JANUARY 2021

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LENDING

Predictions – treat them like horoscopes Tony Marshall managing director, Equifinance

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have never had too much faith in industry predictions for the upcoming year. To have any chance of being realistic, the assumption has to be made that external factors will not affect the period being reviewed and as we know now, that didn’t work out very well for last year’s predictions!

With COVID-19 still at large, a Brexit trade deal unresolved at the time of writing, and a massive national debt to be repaid, predicting how business and, in our sphere, the second charge sector will work in 2021 would be just as well-served by looking at the entrails of goats as our ancestors did.

What I can say with confidence is that 2021 should see a recovery in second charge lending. We have seen positive news on volumes over the past quarter, which is a reflection of the uptake of first charge activity.

Admittedly, it has been a much more gradual increase but provided there are no further shocks in 2021, demand for second charge should continue

to grow. If we view 2021 as a time for people to pause and consolidate because of concerns over the financial outlook, we could see a dip in house purchase confidence and a consequent demand for finance to fund home improvements. The financial hangover will also bring with it greater demand for debt consolidation finance.

FINANCIAL EXCLUSION

The pandemic has hurt us all and, amongst other issues, one of the ways this is beginning to manifest itself is in the restriction of access to funding.

Many more applicants are already struggling to raise capital for whatever purpose, and this can only become more difficult as lenders draw their horns in and understandably take a more rigorous view on affordability.

In my opinion, financial exclusion relates to those who are unable to obtain credit via conventional and mainstream solutions such as prime unsecured or first charge mortgages, due to the tightening of criteria or a reduction in product availability. This is a consequence of the national crisis over COVID-19 and the subsequent economic shock that has been unleashed in its wake.

The good news is that there will be instances where a second charge

One sure prediction is that our help is going to be needed more than ever in 2021

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solution can provide a suitable alternative or substitute.

The question that needs to be asked is how advisers are going to respond to requests for funding at a time when affordability is going to be a test – not just at the time of application, but also when the funding is in place.

In the case of debt consolidation, there is a strong case for new finance spread over a different timescale, often at a lower rate, which can reduce an applicant’s monthly outgoings and ease the burden of trying to repay sums which cannot currently be supported.

In addition, restructuring debt – if used sensibly – often enables a customer to avoid a declining credit profile and the subsequent consequences of this.

Most advisers would admit that they are not trained debt counsellors, but many times find themselves with a customer who is looking for more funding but who, on examination, might be better served by instead talking to creditors about mutually agreed payment plans, or even getting advice on bankruptcy.

That said, structured debt solutions can and do have long-term effects on the customer’s future lifestyle and aspirations.It is likely they should only be considered in circumstances where all other options have been discounted.

It is difficult to find the right balance.

Given the parlous state of the economy and the pressure on jobs, 2021 will see an increase in requests for capital raising, and advisers are going to have to be particularly careful at assessing the viability of each case.

Lenders are here to lend, and ultimately the responsibility for making an offer of mortgage lies with them, provided the applicant has given their adviser a full picture of their past and present situation.

Our role as lenders and advisers, then, is to try and make sure that the door to finance remains open to everyone, while ensuring that our customers have been made fully aware of the pros and cons.

Our help is going to be needed more than ever in 2021, and we must be alive to the responsibility we all bear to do the best we can for our customers. M I www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER INTERVIEW

BRIDGING

More than just a bridging loan Brian Rubins executive chairman, Alternative Bridging

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ow would you use bridging finance for your clients?

Perhaps as a short-term fix to complete an urgent purchase, or finance for a housing development?

It could be used as an alternative to an overdraft, or to finance a refurbishment.

It could even be used as a term loan.

Of course, it could also be residential or commercial, regulated or not, a first or a second charge.

There are a variety of answers, and each offers a different opportunity.

It is a multi-faceted product, and in fact, ‘bridging finance’ is now a euphemism for an alternative source of property finance for owner-occupiers, the property industry and the business community. It is therefore a diverse source of finance for an equally varied group of borrowers.

Bridging has applications for financing property purchases, funding residential development, providing working capital and repaying expired loans. It can also be used for improving existing assets and auction purchases.

For introducers, these different funding choices, which are sometimes all available under one roof, present a great opportunity to meet the diverse needs of clients.

associated with bridging, but it can prove an invaluable option.

Similarly, a lender with a listening ear that provides decisions made by people, not algorithms, can provide businesses which are on the path to recovery with a term loan and the much-needed time to implement their plans to re-establish profitability.

Where a property needs improvement before being refinanced in the mainstream, a refurbishment loan can be the answer. Equally, acquiring and refurbishing a buy-to-let property with a refurbishment bridge enables value to be added and the repatriation of capital for another project when the property is refinanced.

Development finance is the oddball in the ‘bridging’ family of products.

Its success depends on in-depth investigation, as there are many moving parts such as land value,

construction cost, sales value and separately, sales demand. Because of this, more questions will be asked and the closing period extended – this is just a fact of life. But remember, the more experienced the lender, the shorter the period and the more certain the outcome.

CHOICE BREEDS OPPORTUNITY

Lenders with the ability to offer the choice of all these products provide their introducers with a world of opportunity. Not only at the outset – providing an alternative solution when the facts prove not be what is expected – but also during the life of the loan and on its expiry.

How helpful it is, when a lender can extend a bridging loan or transfer to a term loan, or even fund unexpected repair costs, and all under one roof.

So, introducers, please listen here: a bridging loan is not a just bridging loan, but an alternative source of finance that provides an invaluable tool for you and your clients.

Learn what your lenders have to offer, work closely with them, and turn every opportunity into a loan. M I

ALTERNATIVE SOLUTIONS

On-the-ball lenders and savvy brokers will be able to recognise that sometimes bridging can present an alternative solution, which could cause a ‘no’ to turn into a ‘yes’.

For example, when the income on a property has not been stabilised and an exit by refinance is a year or two away, then a term loan for three to five years is the answer. This is not readily www.mortgageintroducer.com

Bridging finance is multi-faceted and offers a variety of answers

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MARKET

Rising to future challenges Laurence Morey chief executive officer, Pepper Money

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he COVID-19 pandemic has severely tested the resilience of our market, our customers and our people.

Looking to 2021, it’s important to consider the lessons learned from the last 12 months – and importantly, the opportunities that lie ahead.

After a promising start to 2020, the onset of the pandemic caused a tsunami of changes to hit financial services. By way of just one example, on 17 March Rishi Sunak announced a series of initiatives to aid struggling mortgage customers, which included payment deferrals and a moratorium on repossessions. By the end of April, one in seven mortgages were deferred.

Delivering the necessary support to customers in just a few weeks required a monumental commitment from both our staff and those of key third-parties, with significant operational changes being implemented at pace, and at considerable expense.

This is before you even account for the impact of the payment deferrals on cash flow. This impacted all lenders, of course, but whereas banks were granted access to additional liquidity sources and capital relief as part of the UK authorities’ response to the pandemic, lenders funded by the capital markets were not eligible for the same support.

It was a very challenging time and the future, frankly, looked uncertain.

There was much uncertainty as to how the capital markets would perceive the imposed mortgage payment deferrals, and the impact of this on future securitisations.

Despite this uncertainty, specialist lenders remained committed to the market, notwithstanding the need to adjust product offerings and processes to take account of COVID-related risks. It was important to deliver as

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MORTGAGE INTRODUCER

much certainty as possible within an extraordinarily uncertain environment.

The housing market reopened in May and steadily gathered pace until July, when another announcement served to turbocharge the market with the removal of Stamp Duty Land Tax (SDLT) for many buyers.

MARKET DYNAMICS

The developments in the UK market and a reduction in the COVID-19 infection rate during the summer were fortunately accompanied by a sound reassurance of demand for UK residential mortgage-backed securities (RMBS) in the capital markets. Throughout the summer, specialist lenders completed successful securitisations that gave them the confidence to increase their lending appetite and meet customer demand.

This set up an interesting dynamic that has characterised the market since. Given that so many people were financially impacted by the pandemic, all but the simplest of mortgage applications now needed to be manually underwritten in order to factor in the events of the last year.

An automated approach cannot make a pragmatic decision based on how a customer’s income and financial circumstances have been affected by the pandemic. Whereas specialist lenders are geared up for manual underwriting, supported by automated processes, mainstream lenders are not.

As a consequence, we have started to see specialist lenders delivering superior service levels – challenging previously held preconceptions.

Not all specialist lenders have been successful at maintaining an up-to-date service, but those that have are finding that they are now working with whole new cohorts of brokers who may not have considered using them in the past.

At Pepper Money, we have been setting new standards as to what brokers can expect, with turnaround times within 24 hours at every key stage of our application process, and even a completion within 16 days of

JANUARY 2021

the initial application. So, specialist lenders can look back at the last year with a degree of satisfaction that we have undergone the sternest of challenges and continued to deliver for brokers and customers.

With a roll-out of vaccinations, we can now look forward to emerging from the pandemic and finding a way out of the economic downturn. But as we do, we expect that more customers will have experienced diverse financial circumstances, such as irregular employment and missed payments.

Historically, mainstream lenders have constrained their risk criteria when emerging from a downturn, and so it will be specialist lenders that are vital to enabling customers access to the mortgage market and creating more opportunities for financial inclusion.

At the same time, whereas we had no data back in April to understand how people would react to the pandemic, we now have a track record to show how mortgage books have performed. We have closed successful securitisations and we are building pools, in confidence that the capital markets appetite is there.

2020 was certainly challenging, but specialist lenders have shown strength and agility. We operate in a funding environment that has been through the hardest of tests and continued to function successfully, and we now have an opportunity to improve financial inclusion for the millions of people whose finances have been impacted.

At Pepper Money, we have continued to evolve our product and service proposition throughout the pandemic. We are now working with more brokers than ever, and we have exciting plans to continue to develop our range of solutions.

In 2020, we learned that specialist lenders could rise to the challenge, and in 2021 I remain confident we will see them take the front foot in delivering reliable, fast-paced financial services to a diverse range of customers, amidst an environment of caution and constrained criteria in the mainstream sector. M I www.mortgageintroducer.com

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 !

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y: d u t S e s Ca x y e l l n p O m t s Co ere t n I & m Short Ter

ÂŁ930K interest only mortgage on a 2nd property valued at ÂŁ1. 25m - aged 75 ty er p o r p g n i t Exis re o m g n i d held pen t e k ar m e l b favou ra conditions

FOR INTERMEDIARIES

0800 378669 Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Register no 156580).

y: d u t S e s a C x e Compl arder H g n i k r o W s t Asse

Customer raising capital to refu rbish a barn on a large plot of lan d (previou sly run as a farm) w hich will become the new main residence Potential income from the drawdown of liquid assets used for affordability - applicants are retired and only drawing the income they require

on i t u ol s y l n O t ÂŁ750k Interes ent m y a p e r e h t h agreed wit the of e l a s e h t g st rategy bein idence res n i a m t en rr u c

FOR INTERMEDIARIES

0800 378669 Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Register no 156580).