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EDITORIAL
COMMENT Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com
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RyanFowlerMI
Tentative steps towards strength
T
he market is back, to an extent at least. Since your last issue of Mortgage Introducer the government’s easing of the lockdown has allowed property moves to once more take place. This has seen a surge in demand as people look to move home once more and property chains restart. Different parts of the industry are coping with the current issues facing the UK with different levels of competence. On the whole brokers and lenders alike have acted admirably in the most trying of circumstances. It’s been great to see lenders return quickly and get back to supporting borrowers and brokers when they need it most. Brokers should be congratulated as they continue to support their clients at a time when advice could not be important. That’s why it is so disappointing to hear that Robert Sinclair (Page 7) is concerned that intermediary advice capacity could be reduced after the Financial Conduct Authority (FCA) invoked a data request to 13,000 firms. He’s called on the FCA “to see
mortgage advice firms not as a special case, but different and a solution to consumer problems, not the creator.” As usual, the regulator would do well to heed his warning. At the time of writing the markets in Scotland and Wales are still closed. Time will tell if enough has been done to contain the second peak that is feared by many and help keep the market open. As we enter the Summer months there is a need to remain optimistic and it is as important to do so now as it was when the lockdown came into place in March - despite concerns about the economy. Government action to support jobs and the benevolent approach to arrears which is being taken by lenders should hopefully limit the long-term effects on the housing market. Will it take a while for the market to recover? Most certainly. But we are taking the first tentative steps on the road that will hopefully lead the market back to strength. We look at the impact of the crisis on the market on the road to recovery further in our round table with NatWest on page 44. M I
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JUNE 2020
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MAGAZINE
WHAT’S INSIDE
Contents 7 AMI Review 8 IMLA Review 9 Lending Review 10 Holiday Lets Review 11 Advice Review 12 Surveying Review 14 Marketing Review 16 High Net Worth Review 17 Buy-to-let Review 21 Protection Review 28 General Insurance Review 31 Building Society Review 32 Equity Release Review 35 Conveyancing Review 40 The Outlaw The latest covidiot round-up
44
COVER
32
EQUITY RELEASE
44 Cover: The road to recovery Jessica Bird breaks down the discussion between Mortgage Introducer’s most recent round table panellists, from product changes to market predictions 50 Loan Introducer The latest from the second charge market 56 Specialist Finance Introducer Development finance, bridging and FIBA 62 From the frontline Supporting the NHS
40
THE OUTLAW
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DEVELOPMENT FINANCE
JUNE 2020
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REVIEW
AMI
Showing true colours Robert Sinclair chief executive officer, AMI
T
he first week of June saw the interim chief executive of the FCA make his boldest move since taking the reins. In announcing that the FCA was invoking FSMA Section 165 powers linked to a data request to 13,000 firms they clearly indicated that they mean business. All surveyed firms must complete the return within seven working days, requiring financial performance data, which is supplementary to the usual Gabriel returns. The other important fact is that this is being operated by the recovery and resolution team, not the usual data, strategy or supervisory units. In the messaging that went with the request and a speech made by the one of the executive directors of supervision, Megan Butler, the purpose is to allow the FCA to be able to identify early in the process firms who may be in financial difficulty or breaching their capital limits. The messaging is that where a firms is loss making, insolvent or has capital issues, they should speak to their supervisor and reach out to the FCA Supervision Hub This will be to allow them to assess whether the firm can trade out through a recovery plan, or if they have to implement closure under a resolution plan and complete an orderly wind-up including transfer of clients. At a time when the FCA is encouraging all lenders, insurers and firms to support consumers through the impacts of the crisis, and they are looking to advisers to help consumers navigate complex financial circumstances, I am not sure this is the best approach. In addition, we have a government working hard to keep as many www.mortgageintroducer.com
businesses open as possible to make sure there is capacity to deliver the recovery. In mortgages we have yet to resolve the mortgage prisoner issue, interestonly customers still need help and those who have deferred their mortgage payments will need advice. FLEXIBILITY NEEDED
Having asked the FCA for consideration of flexibility around reporting, capital and the ability for firms to borrow to bridge the crisis at the start of May, this is the first tangible reply. It is not encouraging. Of course, where there are customers’ assets at risk, or client money then this is a very necessary approach. Where however we are looking at a mortgage advice firm I am struggling
to see the parallel. They hold no customer money or assets and are merely custodians of personal data. It is to be hoped that when the results are in a very different approach is taken to mortgage advice firms. They may have a temporary cash flow issues until purchase and remortgage business begins to flow again, and housing sale and purchase chains complete. AMI is deeply concerned that the introduction of this approach could precipitate a loss of market intermediary advice capacity, which we should be working to avoid. I implore the FCA to see mortgage advice firms not as a special case, but different and a solution to consumer problems, not the creator. M I
Product value in insurance Stacy Reeve senior policy adviser, AMI
O
n 3 June the FCA published guidance on the value of insurance products (GI and pure protection). The focus is on products which, due to coronavirus, may not be able to provide the expected contractual benefits or there is a fundamental change in risk and products are providing little or no utility to customers. The guidance expects product manufacturers and providers to carry out product level assessments within the next six months, to ascertain whether there is anything that could materially affect the value of their products and to decide on resulting action. Although there are existing obligations on product governance, coronavirus should be a trigger for insurance firms to consider its effect on their products. In response to the draft guidance, AMI sought clarity on the role of intermediaries in this process. The FCA has confirmed
in their Feedback Statement (FS) that ‘[it] would not expect brokers to be conducting product assessments, unless they are the product manufacturer’. However, there is the expectation that the distribution chain will work together to ensure that customers are made aware of any changes at product level. In the FS the FCA also refer to guidance on the GI distribution chain, which was published in November 2019. Firms distributing insurance products should consider revisiting this guidance. It is less likely that there will be a change to the value provided by insurance products sold by an intermediary in our sector compared to others such as travel; however intermediaries could see changes if some additional benefits on protection products, for example, cannot be digitalised. The concept of value has grown in prominence within the regulator’s vocabulary in recent years – the word ‘value’ is mentioned 28 times alone in the FCA’s 2020/21 Business Plan. AMI expects to see a greater focus on this throughout 2020/21 as we navigate this crisis and beyond.
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MORTGAGE INTRODUCER
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REVIEW
LENDING
Building on the positives David Lownds head of marketing and business development, Hanley Economic Building Society
T
he highly positive news around the return of physical valuations has provided the housing and mortgage markets with a huge lift. I won’t go over the ins and outs of this move as it will have been widely covered from all angles. However, we’ve already seen many lenders – who were forced to temporarily exit the market – return to dip their toes in the lending water and, by the time you read this, I expect to see a steady stream of increased lender activity, product ranges being refreshed and criteria being tweaked. But what does the market currently look like for those returning lenders, and for those who have managed to battle their way through this challenging period? REMORTGAGE
According to proprietary data from LMS, remortgage completions were suggested to be 57.4% higher in the second week of May, when compared to the second week of April. There was said to be a slight drop in completions week-on-week between the first and second weeks of May, as 1 May brought a 63.7% increase compared with the first working day of April. Overall, LMS reported that remortgage completions were consistently running ahead of both March and April figures, and May 2020 volumes are reported to be ahead of those from May 2019. Continued strong performance, in terms of completions, coupled with a rise in cancellations and a slightly decreased rate of instructions, means that pipeline business has continued its recent contraction. Compared with the same point in 2019, remortgage pipeline cases were said to be down by 10%. Positives should be taken from the work completed by lenders www.mortgageintroducer.com
to process the more complex cases during lockdown. To some extent, pipeline growth in the early weeks of the crisis stemmed from a slowdown in the ability to handle the more intricate cases, which were then carried forward and remained in the pipeline for longer. As outlined in this data, this surge in completion volumes is ‘testament to the industry’s hard work in developing and investing in the processes required to handle non-standard and complex cases, under remote working conditions’. I couldn’t agree more with this statement and moving forward the remortgage market will continue to underpin the whole mortgage market. THE HOUSING MARKET
According to Zoopla’s UK Cities House Price Index, there are approximately 373,000 property purchases currently on hold due to COVID-19. These are estimated to be worth a combined value of £82bn. Data from GetAgent.co.uk outlined that, despite the disruption caused by COVID-19, 79% of home sellers still plan to market their property within the next 12 months, although 43% of buyers said they would not make an offer on a property in the current market conditions; a marginal fall from the 46% recorded two weeks prior. Also included in the report two weeks ago, 42% of sellers were said to be extremely concerned about the impact of coronavirus on their property sale; this has since dropped to 33%. In addition, estate agents’ concerns around the market have dropped from an average of 8.2 two weeks ago to a current level of just 7.6 – these were based out of 10. The latest data from the Royal Institution of Chartered Surveyors (RICS) highlighted that 21% of property professionals reported a decline in house prices during April. RICS also found that eight out of 10 estate agents surveyed had seen buyers pull out of house purchase deals during the month, with 92% seeing a drop in sales and 96% reporting a fall in new
instructions. These latter figures come as little surprise with the UK housing market effectively frozen during the period covered by the RICS residential survey but there does appear to be strong levels of pent-up demand from purchasers which has translated into a flurry of enquiries. It will be interesting to see what percentage of these enquiries are converted into business, and how quickly this will happen. PRODUCTS AND ESIS
Although the number of mortgage deals has almost halved since March, the average mortgage rates on two and five-year fixed deals are reported to have hit historic lows. Data released in the Moneyfacts UK Mortgage Trends Treasury Report showed that the number of available mortgage products has fallen from 5,222 at the beginning of March to just 2,566 at the start of May. While the fall in mortgage deals means that borrowers have less choice, there was good news as the average rate on two and 5-year fixed deals have fallen to lows not seen since Moneyfacts’ electronic records began in July 2007. The current average two-year fixed mortgage rate was said to stand at just 2.09% while the average rate for a five-year fixed mortgage was 2.35%. In other positive news, Mortgage Brain has seen the number of ESIS produced from its mortgage sourcing systems increase for the second week in a row. ESIS numbers are now reported to be 12.5% higher than the lowest point recorded, although they remain down by 40.3% compared to the nine-week average to 15 March. We are entering a crucial period for the mortgage market as lenders continue to strive for balance when it comes to activity, volume, risk, pipeline cases and service standards. Whilst we shouldn’t expect too much too soon, there are certainly some positive signs emerging on a daily basis which bode well for the short and medium-term future of the industry. M I JUNE 2020 MORTGAGE INTRODUCER
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REVIEW
HOLIDAY LETS
Changing prospects for holiday lets Jean Errington BDM, Harpenden Building Society
T
he lockdown is affecting all areas of every business, especially the travel and tourism sectors. The coronavirus outbreak is also causing a widespread reconsideration of holiday choices, with signs that more and more people are looking at domestic destinations, rather than the overseas adventures that have become so central to our way of life. Accommodation site Host Unusual says it has seen a shift towards domestic locations since the outbreak, with a 20% increase in traffic to its website since last March. Campsites.co.uk is also attracting more interest than usual, with traffic up 18% in February and nearly 30% in March, compared with last year. Now more than ever, those looking for a holiday are steering towards our own green and pleasant lands. The variety on offer is truly amazing, from back-to-nature camping with the family, to a luxury no expenses spared castle with butler included. The choice is theirs. A CHANGING MARKET
As awareness grows over the need to reduce carbon emissions, along with the likely reduction in the number of airlines in operation following the COVID-19 crisis, holiday patterns are certainly changing. According to VisitBritain, domestic breaks already account for almost 80% of tourism in the UK, with about £72bn spent annually by ‘staycationers’ in England alone. Meanwhile, 35 million overnight holidays were taken between July 2018
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and July 2019, up 2% on the previous 12 months. Coronavirus is likely to mean that many more people will take their holidays in Britain this year, and in the years to come. LOOKING AHEAD
If travelling abroad becomes expensive and painfully slow due to extra checks, might we decide to take longer, less frequent holidays closer to home? Are the European weekend city breaks a thing of the past? Will more Europeans decide to visit the UK if the exchange rate continues to be favourable? We obviously don’t know for sure, but while the world is unlikely to be turned on its head, this unprecedented crisis will have some impact. The ‘new normal’ will not be like the old one.
The big ones are the location of the property, and affordability. AREAS TO CONSIDER
Some lenders have restrictions on the location, which can include certain counties or regions. Specific geographic locations such as city centres may also be on the exclusion list. Future sale potential is an area which is often explored. If so, that can be a factor in the lending decision as the future market is smaller. Income yields on a holiday let are often higher than a standard tenancy, yet many lenders base their calculations on the tenancy agreement. It therefore makes sense to check how they arrive at their figures. In addition, only some lenders look at the applicant’s total income, rather than basing the calculation on the income of the property. This is how we assess let property lending, using the client’s earned income along with their savings and investments and a portion of the expected rental income. Finally, think about the type of property and construction methods, as these can also be a crucial part of the application process.
DEMYSTIFYING HOLIDAY LETS
Holiday lets are becoming an increasingly attractive investment proposition, and it’s not just down to the pandemic. As the buy-to-let (BTL) market becomes more regulated, investors are looking for alternative sources of income. Holiday lets can be a sensible investment, with the potential for higher yields than traditional buyto-lets, while still benefitting from a taxable allowance. In addition, the owner can utilise any properties they may have in desirable locations. At Harpenden Building Society, we have been providing a product and assisting clients in this segment of the market for many years. What we have learned in this time is that applications can be complicated, and without the right support it can become very time consuming. When trying to find a lending solution, there are a number of features and characteristics to be aware of.
SUPPORT FOR BROKERS
We will be able to help you explore these possibilities with your clients. We know from experience that holiday let mortgages can be complicated, and this is one reason why many lenders shy away from them. This is a niche area and suitability cannot be assessed through computer modelling alone. Flexibility and the capacity to create bespoke solutions is important for holiday lets. Given this special nature, our underwriters are all available to talk with customers and brokers to gain a thorough understanding of their individual circumstances. Mortgages for holiday lets are available for purchase, remortgage or release of equity to include short-term holiday letting. We are available to support your clients and discuss options, and help you find a way forward. M I www.mortgageintroducer.com
REVIEW
ADVICE
Trust in mortgage advice matters John Somerville
head of regulatory relationships, corporate and professional learning, The London Institute of Banking & Finance
O
ver the past two years, most people have wanted mortgage advisers to help them get lower rates. For many advisers and their clients, those were purely transactional relationships; all that mattered was the cheapest deal. Thanks to the coronavirus pandemic, clients now need full, professional advice on how best to manage what is likely to be their biggest single debt and outgoing: their mortgage. Most banks and building societies have allowed three-month payment holidays, and the Financial Conduct Authority (FCA) has said these should be extended if necessary. People who have been furloughed are still receiving at least 80% of their salary, but many will be concerned about what the future holds. A mortgage holiday doesn’t mean that the debt has gone away, however. And the interest is still piling up. Even more importantly, the economy is likely to face a hard landing. People will be concerned about whether they could lose much of their income or face a permanent reduction. That is a very profound threat to people’s financial and mental wellbeing. Helping to manage some of the financial challenges is where a good mortgage adviser can really help. THE PRESSURE IS ON
Banks and building societies started offering mortgage payment holidays when the lockdown began in March. At the same time, the government launched its furlough measures, paying 80% of salaries up to £2,500. These are expected to be wound down from August. That wind-down will include having companies ‘share’ some of the costs. Whatever the final details, it is likely that, by the end of the summer, www.mortgageintroducer.com
a sizeable number of people will have to scramble to find a way to meet their financial commitments. BE PROACTIVE
The Bank of England cut the Bank Rate to a record low of 0.1% in March, and also eased some regulations to help banks continue to lend. Borrowing was already cheap, which means there are many households with a range of debts beyond a mortgage. But low interest rates do not equal easy-to-manage finances, even when people are in secure employment. So, advisers should reach out to clients offering help. Clients who seemed in a strong financial position pre-crisis may now be facing complex and difficult financial decisions. Owners of buy-to-let (BTL) properties, for example, where the tenants are no longer able to pay their rent, could be squeezed hard. The looming economic crisis will be a challenge for mortgage advisers as much as their clients. A mortgage adviser’s responsibility is to get the best outcome for their customer, considering that customer’s financial needs and outlook. But there has been a seismic change in the financial landscape. Many people will be in difficulties they never expected to face. They might have very little clarity on what the coming months will hold for them. They could be worrying about losing face, and may struggle with anxiety or more serious mental health problems that cloud their judgement. Advisers will need to provide not only detailed, up-to-date knowledge of the market and the government schemes, but also empathy, honesty and integrity. They will also have to help their clients to be honest about what may be embarrassing and distressing personal matters. That means establishing trust. Don’t take it for granted that clients you already know will be happy to open up about changed circumstances. And remember that it is not easy to
build trust even in person. Via videolink, it will take real skill – social, emotional and specialist financial. Understanding how people feel about profound financial dislocation, and helping them manage it, is not something that a computer programme can handle. How advisers help people keep their homes through this crisis will be the acid test of the industry. You might want to consider developing or updating your skills. CeMAP Diploma will help you understand more complex mortgage scenarios and to develop your research skills. Some clients may be looking to access the equity in their homes to meet unforeseen expenses. The Certificate in Regulated Equity Release (CeRER) – a growing part of the market – will train you to understand different customer needs, the many products available and how to advise on the risks. THE BANKS
How banks manage this crisis will also be a hard test. In the property crash of 1989, many lost their homes when banks held them to mortgage terms. The financial crisis of 2007-8, when the banks were bailed out, has arguably strengthened the position of the customers. A bank that cuts people loose for the sake of six months while they struggle to get back on their feet will have to explain itself. However, very low interest rates, an inverted yield curve, and the competition in the mortgage market that comes from ring-fencing mean that banks are operating on slim margins. Mortgage advisers will have to work hard to keep up with what banks are reasonably willing to do to help their mortgage customers get through this. The bottom line will be trust. If banks can trust advisers to get it right, if clients can trust advisers to do their best for them, and if advisers can build that relationship with both the market and clients, many people will be helped to avoid the hardest landing and lay MI stronger foundations for the future. JUNE 2020 MORTGAGE INTRODUCER
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REVIEW
SURVEYING
De-coupling valuation and property survey Joe Arnold managing director, Arnold & Baldwin Chartered Surveyors
I
’m slightly baffled by the raft of negative headlines we have seen about the housing market in recent weeks as my experience is that activity has very much picked up where it left off prior to lockdown. At Arnold & Baldwin, we have received lots of enquiries from firsttime buyers and home movers and properties are moving, with offers at or close to asking price. This is very positive news, but there are concerns that panel managers now have both pipeline cases and new cases coming through, coupled with the extra administration that each case now requires – and this is naturally causing delays. As a consequence, the process of getting into homes to carry out a valuation could potentially add weeks to the mortgage application process. But this does not have to be the case. While my surveyors are very busy at the moment, they are busy carrying out surveys in response to direct enquiries and referrals from brokers and estate agents. We still have some capacity, but at the time of writing, we haven’t received a single enquiry from a corporate panel manager. This experience appears to be replicated amongst other SME surveyors with whom I have spoken, so it looks like it is widespread. We are being told that mortgage enquiries are taking weeks to process because of the wait for carrying out a valuation, but there is currently capacity in the system to carry out valuations much quicker than that. It seems then, that there is a blockage
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in the supply chain that is preventing valuation enquiries from being referred out to smaller surveying firms that have both the capacity and the ability to fulfil them. So, what steps should brokers take to ensure that their mortgage enquiries stand the best chance of being processed without delay? One approach that should help is to de-couple any home survey that is requested by your client from the valuation that is required for the mortgage finance. REMOTE VALUATION
If you submit a mortgage application requesting just a standard valuation without a property inspection, then there is a greater chance of this valuation being carried out remotely without a surveyor needing to visit the property. This should mean that you are more likely to avoid being stuck in a queue for a physical valuation and that the enquiry can be processed more quickly. It also means, however, that your client remains uninformed as to the true condition of the property and may find that they are walking blindly into a situation where they are exposed to the potential of expensive repair works.
Decoupling could speed up the homebuying process
So, for your client’s peace of mind, they should think about instructing a Homebuyers Survey or a Building Survey for a physical inspection of the property, but they can do this separately from the mortgage valuation. There are actually a number of benefits to de-coupling the mortgage valuation and the property survey. Not only does it give the mortgage application a greater chance of being processed more quickly, but it can be advantageous for a homebuyer to separate the valuation that is used to give a lender confidence and secure finance, and the survey, which may pick up defects in the property and could then be used to negotiate a lower price. If this is an approach that you think could benefit your clients, you could also potentially benefit your business. At Arnold & Baldwin, for example, we pay a referral fee to brokers who instruct a home survey with us on behalf of their clients. So, by de-coupling the mortgage valuation and the property survey, you could speed up the time it takes to achieve a mortgage offer, provide your client with greater negotiating power and earn additional income in the process. There are things to think about, of course, and instructing the valuation and the survey separately, rather than together, may be slightly more expensive for your client. So, it is important that you discuss the options and the considerations and follow the approach that best suits their circumstances and expectations. Many homebuyers, however, will value a potentially faster process in securing a mortgage offer, particularly in a market where they may be competing with other buyers. The post-lockdown property market has come racing out of the blocks, and this comes with its own challenges, such as potential delays in carrying out valuations. There are, however, ways to overcome these challenges and by de-coupling the mortgage valuation and the property survey, you could put your client in a better position to secure their next home. M I www.mortgageintroducer.com
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REVIEW
MARKET
We are all going to need each other Stuart Miller customer director, Newcastle Building Society
O
ur lives have changed and are being reshaped in ways we couldn’t have imagined – the consequences of which will be with us for years to come. It is natural for us as human beings to want to get back to some semblance of normality as soon as possible. We spend our entire lives trying to put certainty around us, because life is, on many levels, a precarious business. In my view, institutions that are driven by a strong underlying purpose and have the interest of their customers and partners at heart will not only survive, but go on to thrive. When we look back at the history of the building society sector, it has done exactly that. It has developed and continued to look after the interest of its members, whatever the times have thrown at it. At the root of this is trust. It permeates all our business and is as important now as it ever was. The entire mutual model depends on it, and has done from the outset. The oldest recorded mutual was Ketley’s, founded around 1775 in Birmingham. Founded in a pub by its landlord, Richard Ketley, trust was the bedrock of the organisation. Back then, success depended on the collection of subscriptions from members that eventually formed the accumulated funds to provide each member in turn with a house – often decided by some kind of draw. Those that did not get their property first trusted fellow members to continue contributing by making their rent or loan repayments on time until the very last member’s house was built.
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There is no doubt that the mortgage market is seeing fast-paced updates right now. There is a confluence of product, criteria and funding challenges that we are all working to overcome. The mutual model embraces cooperation, and that part of our DNA will be the very thing that ensures we all emerge with the appropriate products and services for our brokers and borrowers. WORKING TOGETHER
This ethos of trust is as important today as it was in Ketley’s day. The mechanics may have changed as society has evolved, but the need to work together to deliver the end product – a house for a borrower – still needs brokers and lenders to work together to make sure all that is possible is delivered. Trust relies on everyone to deliver their part as best they can. This means lending must be sustainable and not irresponsible, so that what we do now does not impact the ability of others to get mortgages further down the line. As an economy, we do not need another generation of impoverished borrowers and mortgage prisoners. We market our mortgages nationally through intermediaries, and so we place a great deal of trust in our partners; if ever there was a need to work together as a supply chain, then the current time
is a vivid real life example. We firmly believe in the benefits that brokers with access to the whole of the market bring, by providing borrowers with the assurance that they are receiving the right product. It is important that, as we all find our way back to some kind of normality, we continue to stick to our core values and do what has made us successful to this point. We will not abandon our commitment to manual underwriting, for example; this is something for which we, with some other societies, have carried the flag as an alternative to the one-size-fits-all underwriting approach that has become prevalent elsewhere in the market. We will continue to be innovative in developing our product offering, ensuring meets the needs of our borrowers, and offer the human touch of skilled underwriters. We will look at cases in a holistic manner, rather than as a series of hoops through which customers must jump. Some of this will take a different shape for the time being, and in the future, as we navigate the changing demands of borrowers and the current market conditions. But we will do that with our broker partners, to whom we are talking now and with whom we are conducting research to make sure we know what the market requires as events unfold. Our return to a new normal will be a huge undertaking, demanding imagination and commitment from all of us. But at its heart, there are borrowers and savers that need societies like ours now as much as they ever did. M I
Trust relies on everyone to deliver their part as best they can
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REVIEW
HIGH NET WORTH
Social distancing and the property market 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 ‘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 put in place to get the market slowly moving again. Yet despite this, there will be a number of 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, many agents have turned to digital technology to offer alternatives. The digital process works in a few different ways. Rightmove, for instance, has introduced an ‘online viewing’ label, allowing agents to promote homes that come with pre-
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recorded video tours. Other agents favour real-time video tours, which can be conducted ‘live’ over video conference, 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 walkthroughs 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 only on the periphery of agents’ offerings. Now – and for some time to come – they find themselves quickly accelerated front-and-centre. FROM OFFER TO COMPLETION
Beyond just the viewings, there are various phases of the home buying journey which could 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 analogue systems have great scope to be automated, freeing up experts to focus on the more pressing issues at hand. Thirdfort is an example of a service which draws on data analytics, facial recognition and document-scanning technology to prove the legitimacy of funds while eliminating physical documents from the mix. This is not to say that human input will become obsolete. Buying a home is not something you do every day, and the importance of expert reassurance is not going anywhere.
Instead, we should look to machines to take on mundane administrative tasks, freeing up experts to spend more time providing specific insight and customised services, at the points in the journey which continue to be reliant on human 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 is huge scope for the introduction of technology to key points in the home buying journey which can benefit from the flexibility, accessibility and ease that come along 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 agent opening hours as well as the many other commitments that filled our schedules before the pandemic. 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 home buying 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 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 www.mortgageintroducer.com
REVIEW
BUY-TO-LET
Positive signs but pragmatism required Ying Tan founder and chief executive, Dynamo
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ith many lenders returning to the market on the back of the resumption of physical valuations, the buy-to-let (BTL) marketplace has sprung into life after a tough transitional period. This is true of the whole mortgage market, and underlines the importance of intermediary firms, packagers, networks and clubs forging even closer relationships with lenders to keep up to date with the raft of product and criteria changes as we start to pull away from lockdown and enter a whole new lending world. Technology will continue to support and service the BTL sector moving forward, but the weight of the human touch is more evident than ever. The recent lack of physical valuations not only left a huge hole in the wider mortgage market, but decimated many of the more niche markets, where its importance was magnified. Within BTL, some transactions were still able to take place, but this number paled to insignificance when compared with the vast swathes of pipeline business generated prior to the crisis. Another human element which will remain integral across many BTL propositions is manual underwriting. In a similar vein to valuers, the importance of underwriters sometimes goes under the radar, but they will rise to the fore and really show their worth as the sector battles its way through what remains an uncertain time. Lenders will need to work closely with intermediary partners on a caseby-case basis and, while specialist lending activity is likely to see an
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immediate resurgence, we have to remain cautious and apply the right levels of manual and tech support to ensure we move at the right pace and in the right direction. The BTL market will not return to pre-pandemic conditions any time soon, but the signs are certainly more positive than even a week or two ago. So, let’s take a quick look at current market conditions to assess where we go from here. LIFTING THE BARRIERS
Rightmove saw almost 5.2 million visits as the property market reopened on Wednesday 13 May, up 4% yearon-year. These stats highlight how quickly interest returned following the government’s announcement of changes to its housing market policy. The data showed that sales demand (unique enquiries) doubled from Tuesday 12 May to Wednesday 13, representing a figure only 10% lower than on the same day in 2019. Rental demand also surged, with the highest number of unique enquiries recorded in one day since September 2019. These figures show the pent-up demand from homebuyers, tenants and landlords generated before and during the lockdown period. RENTAL YIELDS
The average UK rental yield currently sits at 3.5%, a marginal decline from 3.6% prior to the pandemic, according to research from Howsy. Even with the obstacles facing the current market, there are pockets of strong regional returns. Bradford showed the highest average yield at 10%, followed by Gwynedd (6.2%) and North Down (6%). Other areas ranking highly were Glasgow, Liverpool, Preston, West Dunbartonshire, North Lanarkshire, Forest Heath and Manchester. At the other end of the scale, Malvern Hills,
Kensington and Chelsea and Chiltern reported the worst yields at 2.3%. The largest increase in yields was in North West Leicestershire, up 1.4% during the pandemic. Arun, Corby and West Norfolk registered increases of 0.8%, while North Dorset and Newark and Sherwood saw an uplift of 0.7%. Kettering, Derby, Breckland and Falkirk were also among the top 10 for rental yield uplifts during the pandemic. However, Rhondda Cynon Taf, York, Gedling, Chiltern, and the Vale of Glamorgan were found to have experienced the largest declines, between 1% and 3.5%. While all landlords will be carefully evaluating the performance of their portfolios, the need for mortgage payment holidays or additional borrowing, and any wider housing market trends, the opportunity for strong rental returns is still evident in many parts of the country. WHAT WILL HAPPEN NEXT?
Your guess is as good as mine as to what follows. One thing we do know is that the BTL market is filled with a renewed sense of cautious optimism, and we have seen how adaptable the lending and advice chain is. This is hugely positive, but we do have to remain pragmatic. All firms operating in the BTL space will have to change the way they operate. Products and criteria will continue to be affected, in terms of availability, choice, loan-to-value (LTV) limitations, risk appetites and a valuation backlog. The challenge facing BTL lenders is unique, but if we’ve learnt anything over the past 10 to 15 years, it’s that this is a resilient sector with the capacity to evolve and prosper. Another thing we can be sure of is that the UK reliance on the private rented sector will grow. Tenant demand is expected to surge, as the purchase market will take some time to find its level. Portfolio landlords are expected to lead the charge, as tax and regulatory changes are still creating barriers for ‘amateur’ landlords. I expect BTL lenders to target this band of potential borrowers in the coming months. M I JUNE 2020 MORTGAGE INTRODUCER
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BUY-TO-LET
We must stay the course Bob Young chief executive officer, Fleet Mortgages
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any have talked about the qualities required by mortgage market stakeholders throughout this period in order to successfully ‘exit’ themselves post-pandemic in as strong a position as possible. Let’s make no bones about it, this remains a difficult and challenging time for everyone concerned, and we are far from out of the woods. At the time of writing, the government has just announced a further relaxation of the lockdown rules in England to take place during June, involving more retail premises being allowed to open if they are able to meet social distancing rules. This is another step forward and should result in large numbers of staff within that sector being allowed to return to work. It follows on from the announcement in May, which effectively reopened the housing and mortgage markets in England, with a sincere hope that (by the time you read this) similar announcements in the other countries of the UK may have taken place. But back to those qualities. A lot has been said about the need for ‘flexibility’, and that has obviously been crucial; to say that this situation has been a ‘moveable feast’ would be an understatement. Indeed, advisory firms will know only too well that the ability to be flexible in such circumstances has probably been the difference between the last few months being utterly crippling, and it being a period that can be worked through. We at Fleet, like many others, ripped up the office-based rulebook in record time in order to keep our staff working and our operation active, albeit from various employees’ homes.
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Big questions about what happens next have now started to be answered, especially given that surveyors can physically go out and inspect properties once again. DIMINISHED APPETITE
The pipeline of valuations continues to be worked through. It has to be pointed out that while we do that, and although we have a product range available for new business, we will have a slightly diminished appetite for a while. Most practitioners will, I believe, understand the very good reasons behind that. Quite simply, it’s far too early to say just how the UK housing market might look and react, not just during the remainder of the lockdown, but throughout the rest of the year and possibly into 2021. However, there is a growing sense of positivity and confidence about the UK housing market, and the buy-to-let (BTL) sector, specifically. Our funders have continued to express their long-term commitment to both our business and the UK buy-tolet market – the demand drivers for the sector are, after all, unlikely to change significantly in the future. That being the case, and with our own funder support, we have recently been able to launch back into the market with increases in loan-to-value (LTV). This perhaps gives the market tangible evidence of how progress is being made, and demonstrates the greater appetite to lend that we are showing with each and every day. Of course, people would like to see a quick return to pre-COVID-19 products, criteria, appetite, and the rest; while we will get there, we also need to move somewhat cautiously. Our recent product additions are proof of this already paying off and, as we know more about the fundamentals of the economy and the housing market, we’ll continue to move further in that direction. So, while I don’t think there’s a mortgage market stakeholder in the
land who wouldn’t have been bolstered by the opening of the housing market and the chance for surveyors to get back out in the local communities, even for them, this is not ‘normal’. The requirements around personal protective equipment (PPE) and social distancing mean surveyors are unlikely to be carrying out the same number of jobs as they would normally. The same goes for others like estate agents, who also have new rules to follow. All told, the ability to process the tasks which get us through to exchange and completion is taking longer, and that probably won’t change any time soon. We may well see these requirements becoming a formal part of the process for all time. What this means is that we can’t judge the existing (or future) market on what happened prior to COVID-19.
“There is a growing sense of positivity and confidence about the UK housing market and the buy-to-let sector specifically” The way we work as a BTL lender has changed, and will continue to develop as we get to grips with this situation. I’m sure the same goes for advisers, and it’s certainly the case for clients, who may find themselves in very different circumstances now compared with the start of the year. This will be a journey, and it will require flexibility on all our behalves, but also a level of patience in how we move through this. The body is certainly willing here, but we also want the mind to be able to match that. Getting to full fitness requires both, and even for highly trained athletes, that hard work needs to have happened before we can push on to ‘normality’. We are, however, wholly committed to this; with the right support, we’re already getting there there sooner rather than later. M I www.mortgageintroducer.com
REVIEW
BUY-TO-LET
The first steps on a long road Jeff Knight director of marketing, Foundation Home Loans
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n scanning the buy-to-let (BTL) news section on the Mortgage Introducer website, it’s uplifting to see such a slew of positive stories around lenders re-entering the marketplace and restarting physical valuations. Let’s make it clear, though, that this is certainly not a race. It’s vital that all lenders work closely with their valuation partners to ensure a range of safety measures and social distancing restrictions are firmly in place to minimise any risked posed by COVID-19 before proceeding. Strong levels of communication along each link in the property chain will also help to ensure that this process is as secure and seamless as possible. The lending community is obviously playing catch-up in terms of rescheduling visits and managing pre-crisis backlog cases, but we can’t afford to cut any corners and rush these without ensuring that the right levels of due diligence are in place. That’s not to downplay just how important a step forward this is for the entire housing and mortgage market; nevertheless, we have to remain circumspect about expecting too much, too soon. The market has changed. We all know that. It’s difficult to predict with any accuracy exactly what the specialist lending sector will look like in the coming months. We’re still at the beginning of a long road when it comes to overcoming conditions the likes of which we’ve never seen previously, nor want to again, and seeing how this period will affect people’s financial wellbeing.
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Comparethemarket.com’s Financial Confidence Tracker research – released on 1 May – found that nearly a fifth of UK households were struggling to pay their bills due to the lockdown. According to the research, 20% of households surveyed were not confident that they would be able to meet due payments or stay on top of their household finances over the coming weeks. Among those with children at home, this rose to nearly a third (31%). When asked why they were not confident that they would be able to pay or manage household bills in the coming weeks, 39% said that it was because their employment status had changed for the worse; for example, they had been furloughed, had to take a pay cut or lost their job. Other common reasons for low financial confidence among respondents were that their household income was not sufficient to cover their outgoings (38%), and that the government’s newly introduced financial measures to help households facing difficulties due to COVID-19 were not felt to apply to them (31%). We continue to operate in an environment full of unknowns. The scale of the economic fallout, not to mention the size, depth and length of an impending recession, remain difficult to determine. This means that lenders and intermediaries must be agile in adapting to a new world, whatever that world might look like. We can’t say for sure what the immediate future will bring, but what we can say is that we are in a better position to tackle whatever obstacles are in our way. We can also say with confidence that the private rented sector will play an even more prominent role within the UK housing market over the course of the coming months and years.
WHAT IS THE OUTLOOK FROM INTERMEDIARIES?
From our perspective it remains largely positive. This is also reflected in the latest Mortgage Lender Benchmark from Smart Money People, which highlighted that 77% of brokers believe that mortgage lending will recover to pre-COVID-19 levels within nine months, while 51% believe this will happen within six months. Appointed representatives proved to be significantly more optimistic than directly authorised brokers, with 59% predicting that lending levels will recover within six months, compared to just 37%. Brokers focused on the equity release market proved to be particularly sceptical. Just 19% agreed that the market would recover in six months. Meanwhile, 28% predicted that lending levels would take more than 12 months to recover. WHERE WILL POTENTIAL OPPORTUNITIES EMERGE WITHIN THE BTL SECTOR?
Mortgages for Business recently highlighted two key areas in which landlords might be able to find bargains at the moment: Competitively-priced vanilla buyto-let properties, which yielded 5.7% on average last year; Houses of multiple occupancy (HMOs), which currently have comparatively low mortgage rates. Mortgages for Business also added that 5-year fixed rate mortgages on larger HMOs currently sit between 3.5% and 4%, while lower rates are available on shorter terms, as well as on smaller HMO properties. Last year, of all the different property investment options, HMOs were reported to have produced the highest yields on average, at 9.2%. I can’t disagree with either of these suggestions, and let’s also highlight the fact that seeking advice in complex times will only help landlords maximise their existing portfolios and generate stronger yields from a variety of property-related investments. Now, let’s see what the next month has in store for the buy-to-let sector. Bring it on, I say. M I JUNE 2020 MORTGAGE INTRODUCER
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BUY-TO-LET
Support for tenants and landlords Jane Simpson managing director, TBMC
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ver the last couple of months there have been many conversations around the onus on students to pay rent for university accommodation during the lockdown, when they have returned home to live with their parents and are no longer using the property and facilities. It is a legitimate issue, and most can empathise with students facing the dilemma. PRIVATE RENTED PROPERTY
For students in university-owned accommodation, many have had their rent and related fees suspended whilst the university is closed, but the scenario is more complex for those living in private rented properties. Tenants in privately-owned accommodation are still required to pay rent in accordance with the contract they have with the landlord. Some were under the impression that, because landlords were entitled to apply for a three-month mortgage holiday on their buy-to-let (BTL) properties, they wouldn’t have to pay rent. This is not the case, and tenants are still required to fulfill their obligations where they can. A lot of landlords have been demonstrating support towards their tenants during this period, and have been keen to find solutions that work for both parties. Although it is right to support the concerns of those either no longer living in their student digs or struggling to pay rent due to the impact of COVID-19, it is also important to remember that most landlords depend on rental incomes to support their own livelihoods.
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The National Residential Landlord Association (NRLA) has recently conducted a survey of 4,500 landlords which shows how tenants facing financial difficulties are being “supported by landlords willing to take a temporary financial hit.” In the survey, 44% of landlords had been asked for help by their tenants, and 90% of those asked had been able to provide it. The type of help being offered by landlords included rent deferrals, rent reductions, rent-free periods, early release from tenancies and refunds on house of multiply occupancy (HMO) service charges. The survey also shows that 54% of landlords were experiencing issues with tenants paying rent, or facing unexpected voids. Of those dealing with tenants falling into arrears, 60% had lost at least a month’s rent. TENANT SUPPORT
This data clearly demonstrates the impact that the crisis is having on landlords, and that they are doing what they can to support tenants during this unprecedented period. There may be further concerns for landlords who rent to students, especially those who provide HMO accommodation to serve the sector. Cambridge University, for example, recently announced that it would be running all its lectures online for the next academic year, and other further education institutions are likely to consider similar approaches. The result of having lectures delivered online while maintaining social distancing measures will impact on the whole university experience that students normally enjoy. The sector is likely to report a reduction in student admissions during the 2020/21 academic year, particularly from international candidates.
This gives rise to the question of how the demand for student accommodation will be impacted if fewer students are required to live near campus to attend lectures. It also leads to questions about whether landlords will move away from the student sector to focus on single family lets or professionals sharing properties, leaving a shortage in supply for those who do seek student accommodation in the future. RENTAL VOIDS
It is difficult to predict when there are so many unknown factors, but for those landlords already experiencing rental voids due to COVID-19 repercussions, it is certainly something to contemplate, especially for those who own student HMOs. In a lot of cases, it may be financially untenable to convert HMOs back to a single family let, as it is likely to devalue the property considerably. However, there is a growing trend for professional sharers opting to reduce their rent expenditure by living with others, especially at the outset of their careers. Some HMO landlords may simply shift their focus onto this area of the rental market. It is important that landlords feel confident to remain in the buy-to-let sector as we ease out of lockdown and start to recover from the impact of the coronavirus crisis. If too many decide to leave, it will only further fuel the housing crisis, leaving an increasing number of tenants chasing fewer properties. KICK START
The opening up of the UK housing market, including the lettings market, has been welcomed by landlords; lockdown measures are easing and visual inspections are resuming. The government has published guidelines on how to undertake the various stages in the letting process, such as viewings, safety inspections and tenancy check-ins. This should kick start the BTL sector, and there may be some good opportunities for landlords to expand their portfolios, especially if some sellers are keen to move quickly. M I www.mortgageintroducer.com
REVIEW
PROTECTION
Protection can be the pinnacle of insurance Kevin Carr chief executive, protection review, and MD, Carr Consulting & Communications
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t’s just insurance. Home insurance, car insurance, life insurance… It’s all the same. No one likes it, no trusts it, and no one really cares. That’s what I keep hearing in some sectors, and it’s no doubt true among some consumers, and maybe some advisers, too. But it isn’t true for everyone, and maybe if we all pull together, we could reduce the number of people who think this way. How many insurance-based industries find members of the public who could have claimed but didn’t have cover, and give them cover to show the benefits to others? How many publish exactly how many claims are paid each year by specific types of cover? How many offer a range of free and relevant add-on services, such as counselling, GP helplines and second opinion services? How many insurance
NEWS IN BRIEF 95.1% of all income protection claims were paid by members of the Association of Financial Mutuals last year, an increase from 94.4% in 2018.
industries continually pay well over 90% of all claims every year? The protection industry has a questionable past, especially if we include payment protection insurance (PPI) in the mix, but as the years roll on, and as technology improves, the modern protection industry is one that is standing up to be counted as being open, honest, relevant and fair (just google Max Brett and AIG for a really great and moving example).
Legal & General has reported a significant reduction in the number of new claims coming through, with 41% fewer policyholders claiming on their critical illness policies during April.
“The modern protection industry is standing up to be counted as being open, honest, relevant and fair”
Guardian is trialling a remote screening service, which aims to improve access to insurance, as clients can get covered without having to leave their homes.
Perhaps most importantly, the protection industry is about people and family – rather than being about possessions, such as pieces of metal with tyres or a leaky roof. In a time of deep concern around who we can all trust in any walk of life, the protection industry can be an unlikely source of reassurance – and become the pinnacle of the insurance world. M I
British Friendly has announced three changes to its underwriting processes to help advisers put clients on-risk quicker, including the withdrawal of non-medical limits, introduction of ‘Little T’ tele-interviewing and virtual screenings.
Digital advice proposition Anorak has partnered with an app which allows tenants to access personalised income protection quotes based on their existing rental history. T h i s ye a r ’s P ro te c t i o n Rev i e w conference and awards has been moved to December; however, ProtectX, a new digital event, will take place on 9 July.
Pre-existing condition exclusions
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ome adviser firms, including Assured Futures, are arguing that there is a simple solution to the problem of drowning in postponements, declines and applications stuck in the protection pipeline. What if applications for life, critical illness (CI) and income protection (IP) that needed futher underwriting were on-risk with full cover from day one, with a pre-existing condition exclusion until the process has been completed? Would that significantly increase conversation rates and reduce the number of cancelled applications?
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Or might it ultimately cause more problems than it solves? Ian Sawyer, commercial director at Assured Futures, says the client could be given three options to consider once the application has been underwritten. First, if the decision is unchanged, the policy simply continues at the same price with the exclusion removed. If the decision is different, such as a loading or exclusion, the customer can accept it and remove the exclusion, or keep it as it is. Lastly, if the decision is different but the premium is unaffordable, the
policy could continue as it is with the exclusion still in place. Assured Futures’ Sawyer says: “This could be a relatively simple solution, and the benefits are significant for the industry because it removes the need to keep people engaged during the application process. “The advice [and] sale process becomes much easier and the underwriting ‘journey’ changes from being a time-consuming psychological barrier, to something that happens in the background after your policy has started.” M I JUNE 2020 MORTGAGE INTRODUCER
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PROTECTION
Mental health issues could be here to stay Mike Allison head of protection, Paradigm Mortgage Services
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ental Health Week has come and gone; there was, quite rightly, a heightened level of awareness this year as it coincided with the worldwide pandemic that has affected all of us, not only in the UK but across the globe. Physically, the symptoms of COVID-19 have been similar wherever the outbreak, but what about the mental scarring? One of the things that we have seen all over the world is that kindness is prevailing in these uncertain times. We have learnt that amid the fear there is community, support and hope. Indeed, the theme of this year’s Mental Health Week was ‘kindness’. Many believe that there is an added benefit to helping others – it is good for our own mental health and wellbeing. While many adults won’t openly admit to having mental health issues, the stigma is changing. The bar is being raised higher and higher almost weekly, and even our national sport has come together under the request of one of the world’s highest-profile individuals. In a recent BBC documentary, the Duke of Cambridge, president of the Football Association (FA), met players and fans from grassroots to the elite, and openly discussed their mental health challenges. The documentary highlighted the ‘Heads Up’ campaign, which aims to harness the power of football to generate the biggest conversation ever on mental health, building on the great work already happening across the game. It showed some examples of how a number of individuals are dealing
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with their own issues and facing up to the challenges presented at various points in their lives. Although adults may not admit to others that they have problems, they are increasingly aware of how they might tackle them, however difficult that might be for them. But what about children? Are they just as likely to be able to know what is wrong with them and try to work out how to deal with these issues? Many mums and dads are fearful over the impact of the coronavirus pandemic on their children’s mental health Youngsters face higher levels of anxiety, depression, fear for the future, sense of loss, feelings of isolation and difficulties coping with a lack of structure in this unprecedented time. BACK TO NORMAL
Many parents and carers also say they worry about how their children will cope as they transition back to normal. A survey of 1,854 people across the UK run by charity YoungMinds found that 67% were concerned about the long-term impact of the coronavirus on their child’s mental health. This rose to 77% among parents and carers whose children had required mental health support in the previous three months. Many campaigners are calling for more action to protect young people from the fallout of the UK’s lockdown. YoungMinds’ chief executive, Emma Thomas, said the coronavirus pandemic had turned the lives of millions of children and young people upside down. Many young people are finding it hard to cope with isolation, loss of routine, anxiety about the future, disruptions to their education, and in some cases, difficult or traumatic experiences at home. Despite huge efforts from mental health professionals, young people with
existing mental health needs often can’t get the same level of support as they had before the crisis. An estimated 10% of children aged 5 to 16 suffer from mental ill-health in the United Kingdom. Like adults, children can display a range of issues, from depression and conduct disorders, to hyperactivity and post-traumatic stress disorder. Broadly speaking, if an adult can experience a mental health problem, it is likely that a child can experience it too. Managing these problems can often be just as difficult, if not more so, for children as for adults, and negative coping mechanisms are often harmful and longlasting. With plans to send some of our younger children back to school from June, teachers will need to be aware that not every child will have thrived during lockdown. There may even be a need to think of those who have died; many children may have watched their parents in grief and will truly need to be brave. So, where does our industry fit in to all this? This situation is a timely reminder that protection products and additional services have evolved, especially in the recent past, providing children the same access to support mechanisms as the lives assured. For example, Smart Health, via its provider Square Health, gives the children of policyholders the same access to mental health supports as their parents. At a time when the likelihood of the need for support for children is possibly at its highest ever, it is certainly worth remembering in conversations with clients about life assurance that their children might benefit too. This is also a reminder that life products can offer real, tangible value today, rather than being thought of as a benefit for others. Paradigm Protect members get access to software that can help compare all of the children’s cover available by all providers. Such advice could be invaluable to parents whose children may be suffering, or could do so in the future, as a result of coronavirus. M I www.mortgageintroducer.com
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PROTECTION
Unexpected adviser opportunities Andy Philo director of strategic partnerships, Vitality
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he lockdown has changed life for us all. We’ve all found new ways of working, socialising and parenting. The coronavirus pandemic – and subsequent lockdown – has undoubtedly acted as a catalyst for an unexpected change, not only in how businesses operate, but also how business is done. One of the biggest and most obvious changes has been the switch to digital, with remote selling and the use of Microsoft Teams, Zoom or Skype to interact with clients an everyday occurrence for most. Adapting to using these tools has happened quickly and fairly easily for many.
Whilst there are undoubted benefits to leading a more digital life, it does come with challenges; for example, how can you build strong relationships? Once lockdown is over, it seems unlikely that many of us will revert back to always opting to meet a client in person. It’s important that advisers consider the varied ways they can connect and engage with clients, and how different people want different things. Insurers are also well-placed to help advisers with this, particularly at the moment, in providing appropriate, relevant information and sales aids to help position advice. We’ve certainly taken stock of what we traditionally provide to assist advisers, and have adapted this to suit the current circumstances. Lockdown has also brought about more opportunities for advisers to interact with providers and access information and useful insight.
Back in April we launched a digital speaker series, which we have run throughout lockdown. It has been incredibly successful and popular, giving advisers unique insights and access to experts, such as Astronaut Captain Scott Kelly, who spoke about his year in space and gave advice on how to manage isolation. Another outcome of COVID-19 has been a growing awareness of life insurance and its value, with many people who had either not considered or understood the insurance, or been putting off its purchase, now actively looking to buy a policy. This year will no doubt be regarded as the year when everything changed. We have all been forced to adapt to new social behaviours, change routines and alter working arrangements. As we look ahead to life after lockdown, we should take the opportunity to make choices that create a way of life that works better for us. M I
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PROTECTION
The outlook after COVID-19 Mark Graves chief executive officer, Auxilium Partnership
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couple of weeks ago we announced our collaboration with UnderwriteMe, where we’ll offer our member firms access to the Protection Platform. Why now? Well, among other reasons, never has protection insurance been more desperately called upon, and this platform is the ideal ‘stepping on’ point. Coronavirus is a life (and business) changing event, and all those mortgage advisers who ‘don’t really do’ protection are looking for an alternate revenue stream. With a reportedly huge increase in enquiries, the old adage that ‘protection is sold, not bought’ has been flipped on its head by a public that is terrified for its financial wellbeing. SHARP FOCUS
This pandemic has brought into sharp focus many things, the most important of which are human suffering, illness, isolation and tragically, death. However, from an insurance perspective, it has also meant that we now have proof that what industry research has been showing for a very long time about savings and financial sustainability is true. Most people could not survive without their income for more than a few months. Indeed, almost 18% of people couldn’t survive for more than one week. One week. The government has recommended 14 days of isolation if someone in your household has shown symptoms. Two in five Brits get no more than a month of sick pay, and 16.1% get none at all. This truly is a wake-up call for advisers, who must realise the www.mortgageintroducer.com
importance of the role they play in helping clients take out the right protection products for their needs. Work I’ve been doing recently has confirmed to me that at least 25% of the mortgage adviser population weren’t even asking their clients about their protection needs. An estimate of well over a quarter of a million people have been confirmed to have had coronavirus, deaths have reached 37,500 and 1 million people in the UK are expected to lose their jobs, despite the government’s implementation of the furlough scheme. Advisers who opted out of the protection conversation, or who only mentioned it at the end of a lengthy mortgage process, should surely be feeling worried. What percentage of those people who self-isolated will struggle to pay their mortgage? How many people were hospitalised, ventilated, put into a coma as a result of contracting the disease? What number of soon-to-beunemployed people will have taken out a new mortgage over the last few years? How many of these people would have had some level of financial protection under income protection, unemployment cover or critical illness cover if only their adviser had taken the time to offer truly bespoke advice? It seems to me that those advisers who are now trying to get mortgage payment holidays from lenders for their clients perhaps wouldn’t have needed to, had they sold the right protection at the outset. Advisers often use the lack of time as a reason for not having offered protection insurance, but how much more time are they now spending stuck in a queue trying to get those payment holidays through? How much better would it have felt to have been able to proactively call a client and say ‘It’s OK, we’ve got this, you’re covered,’ rather than wait for
calls to come in from clients who found that they could no longer make their mortgage payments? It’s not news that I believe lenders have a moral duty to clients to make sure they have measures in place to help them pay back their mortgage loans before handing over the money. But they aren’t doing anything about that, so isn’t now the time to take matters into our own hands? Add a line of our own into the mortgage application forms that lays out the clear prioritisation of protection insurance within the mortgage conversation? I see articles published almost daily talking about how well we’ve done as an industry to adapt to this strange ‘new normal’, but have we really learned anything? What are we going to do differently from here on in? If lenders won’t put more effort into making sure an adviser helps a client protect their loan at the outset (and here I do have to praise Nationwide for its 12-month ‘no repossession’ pledge) then this leaves advisers having to accept the responsibility, not just for selling more protection insurance in general, but for selling more of the right protection insurance. CLIENT NEEDS
What percentage of those people who have taken out life cover will actually die during the term of the policy? According to Royal London, a male aged 35 has a 3% chance of dying before he reaches 65, but an 11% chance of being diagnosed with a critical illness. The likelihood of being off work for two months or more rises to 26%! That’s 8.5 times more likely than dying, so why isn’t income protection (IP) the first cover discussed? The conversation must start with what a client actually needs: general insurance (GI) and IP, followed by critical illness (CI) and then life cover, rather than starting with life. Flip the conversation on its head. Carve the budget for protection out of the mortgage loan straight off the bat. Be upfront and don’t ever say you didn’t have time for the conversation. Right now we have nothing but time, so use it wisely. M I JUNE 2020 MORTGAGE INTRODUCER
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PROTECTION
Compare the concerns Steve Ellis head of risk and protection, Premier Choice Group.
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f there is one thing for which we are in this business – that of protecting people’s health and financial wellbeing – it is to take away from them the worry of losing their income. Very unfortunately, COVID-19 has put people in the position of losing both their health and their finances. Comparethemarket.com’s Household Financial Confidence Tracker found that 25% of UK households felt that the easing of the COVID-19 lockdown was causing them to be less confident about their financial situation than they were before. Among the respondents, 16% were less confident about their employment prospects, 50% were unconvinced that the government’s exit strategy could work, and 43% said that the plan to gradually end the lockdown did not seem realistic or achievable. Furthermore, 82% were worried that a gradual exit from the lockdown could cause a second spike in the virus, which could have a more prolonged impact on their household finances. SAVING AND PROTECTING
A fifth (20%) of households are not confident that they will be able to keep on top of payments arising over the coming weeks. Only 65% say they have enough money to tide them over during the pandemic, while 41% feel that their income is not currently sufficient to cover their outgoings. About a third (34%) of those with children have seen household expenditure increase. Perhaps even more worrying is that, while a proportion (29%) are struggling to pay their bills, 10% are taking on debt with additional credit cards or loans and 10% are borrowing from family and friends.
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Clearly for many individuals, taking out cover now may not be as easy; but while it may have limitations as regards specific COVID-19 cover, the acknowledgement of the importance of cover is arguably universally higher now than it has been before. Every one of us is in the same situation – living with a pandemic. As healthcare intermediaries, advisers and brokers, we are all in a position of realising acutely the concerns and needs of our current or prospective clients. They want protection. We can’t protect them against becoming ill or suffering accidents or loss of income, but we can ensure they have their health needs paid for, or their lost income replaced or insured against. SAVING AND PROTECTING
Inflation fell from 1.5% in March to 0.9% in April. Meanwhile, energy costs and petrol costs are down. We are not spending on commuting – or we weren’t – and we aren’t spending in restaurants, pubs or bars. We may be having more takeaways or buying more to drink at home, but this is still cheaper than paying the mark-up on consumables consumed outside of the home. And, when shops do begin to open again, there have been reports that clothing and shoes will be discounted. So, there are savings being made and potentially savings to be had. This will obviously help those who are seeing expenditure rise, as reported above, perhaps because the children are at home all day – or have returned home from independent living – and are eating more! But there is also a clear angle here to prove to clients that, because they are not going out for a meal every week in the month, for example, they are saving £50 or £60 on average that could more than cover a meaningful amount of protection insurance. There is much talk of how things will be when we come out of this coronavirus crisis. What lessons we will have learnt, which of those disciplines
and adjustments that we have made for the good of ourselves and our environment we will keep in place for the long term, and which bad habits we will fall back into. One adjustment could be cutting down on a meal out once a month, while a new discipline could be using the money saved from that to put towards life insurance, critical illness insurance or income protection. HOUSE MOVES WHICH WAY?
One of the many unknowns regarding our world post-lockdown is what will have happened, or will happen, to house prices. Will prices rise or fall? Will there be bargains to be had, or prices to negotiate down? We will have to wait a month or two for official statistics on house prices, but back in March there was some encouraging news. UK house prices were up over the year to March 2020 by an average of 2.1%, up from the 2% figure for the year to February. The highest house price increases were in Northern Ireland, up an average of 3.8% to £141,000, then England, up to 2.2%, to an average of £248,000, followed by 1.5% in Scotland to £152,000, and 1.1% in Wales to £162,000. The best one can argue is that prices had a slight margin before we entered the lockdown period in late March. It might have been that there was enough of the ‘writing on the wall’ as regards the pandemic to impact on prices. Individuals were perhaps less inclined to get the price of the house they wanted lowered to not risk the sale going ahead. Equally, sellers may have tried to entice buyers with a lower price. Who knows how the psychology will run in a post-COVID-19 market. Will sellers employ the same tactics to secure a sale, or will buyers be happy to meet the asking price so to get the house they want and move on (literally) after having so much put on hold in the delays of the crisis? M I www.mortgageintroducer.com
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PROTECTION
The importance of keeping in touch Jeff Woods campaigns and propositions director, Sesame Bankhall Group
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s financial advisory firms continue to work through this challenging period, two key actions stand out: retaining and developing new business. At first glance, this sounds like a very obvious statement; however, successfully achieving this goal is where things can start to get tricky. So, what are some of the steps that advisers can take, and what support is available to assist them? First, know if your customer misses a premium or cancels their policy. It is important to quickly understand any actions a customer is taking, along with the approach being adopted by each provider in relation to this issue. There is a lot of support available to help advisers with this. For example, Sesame Bankhall Group (SBG) collates this information and posts it on its COVID-19 adviser support hub, helping to quickly and easily keep in touch with processes out in the market. Second, make sure you know how to reinstate a policy. A very helpful ‘top tips’ document has been put together by the Protection Distributors Group (PDG), which is a collective of the country’s top protection businesses. One of the helpful hints is to proactively call your customers – not to try and sell them anything, but to make sure they are okay. It is also an opportunity to remind them about any additional benefits that their policy may have, such as remote doctors, counselling and legal services. These are easily forgotten, but could prove valuable in challenging times. www.mortgageintroducer.com
Keeping in touch with existing customers and undertaking this exercise demonstrates true service excellence, which they are likely to really appreciate. You never know, down the line it may lead to a wider conversation about protection needs and solutions they don’t currently have. What I am seeing is that advisers are once again showing true resilience in the face of adversity. My hope is that, as a result, they will emerge stronger and better equipped for the future. With that in mind, our team is also taking this opportunity to talk to
business owners about how they can make their businesses more resilient during this time. One way of doing this is by becoming a holistic adviser with a wider spread of income streams. Some firms might also consider whether this is the opportunity they have been waiting for to make the move from indemnity commission to non-indemnity commission. Actions such as this could help advisers to make their business more customer-focused and resilient, which in turn could help to boost a firm’s long-term value. One thing is clear: the decisions you make and the actions you take now could have long-lasting consequences. However, plenty of support and inspiration from distributors and providers is out there. Just one idea that helps firms to retain or write just one piece of business could make the effort worthwhile. M I
Support and inspiration from distributors and providers is out there
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GENERAL INSURANCE
Lighting the path back to growth Rob Evans CEO, Paymentshield
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here are sparks of life in the mortgage market again. May saw the government ease restrictions on the property sector, with house moves resuming and virtual property viewings now in full swing. These are certainly positive steps in the right direction, but the road to recovery will be long. Predictions from multiple corners of the market are suggesting somewhere between six to nine months before property sales return to normal levels. There are many opportunities that advisers can seize upon right now, however, to begin walking the path back to a position of growth. General insurance (GI) represents a huge stepping stone on this path, with a much broader pool of clients that includes remortgage and product transfer customers as well as new clients. Despite new mortgage applications reducing by 35% year-on-year during April, the demand for remortgages and product transfers is currently much stronger. Selling GI presents advisers with a valuable opportunity to generate both long term as well as more immediate income. Considering your commission options and switching to double indemnity, for example, means advisers currently earning our standard 27.5% commission will receive almost two years commission up-front with 50% in year one, then reverting to 27.5% from year three onwards. This is one of our standard commission options that has been
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available to advisers for the last ten years and will continue to form part of our range of flexible commission options going forwards, making it easy to switch at any time. At Paymentshield, we recognise that for many advisers, selling GI might not form part of what was their ‘normal’ practice, and therefore it may seem like an unlikely step back to growth now. To change that mentality and support advisers, this month we are launching a package of support to help energise your GI sales. NEW TOOLS
Consisting of new tools to help make the most of the opportunities that exist in the market, our CPD resources, ongoing support from our sales team, and our menu of flexible commission options can all give you the confidence to take full advantage of your GI earnings potential. Throughout the coronavirus pandemic, we have been striving to support advisers and protect their income where we can. Our customer contact centre has formed a key part of this. For example, our customer retention rates for March and April were nearly 10% higher than the 2019 average, meaning continued commission for brokers, as these were all customers who had called with the intention of cancelling their policy. Out of all the polices we’ve saved this month we’ve actually identified 143 customers who haven’t been able to get hold of their adviser ahead of their insurance renewal, perhaps because they’ve been furloughed, or perhaps because they’ve been overwhelmed by requests for support. In these cases where we’ve stepped in to save the policy but there’s still an active relationship with their adviser, we have ensured the adviser continues to receive the commission.
In addition to this, we launched a three-month deferred payment option for customers who may be struggling financially at the moment – something that was in development at Paymentshield prior to the guidance issued by the FCA. Giving customers the option of moving to a new policy with an initial no-payment period has helped advisers retain clients and continue to sell during this period.
“A culture of sharing and collaboration will facilitate quicker growth” Our Trustpilot reviews have actually increased during the past two months. One that stood out talked about an experience where a customer had purchased a policy though an aggregator and called to cancel their policy - the conversation with one of our agents caused them to reconsider. In these instances, the quality of broker advice is being upheld by us to ensure that brokers don’t lose out. We all know that there is strength in numbers, and if the coronavirus has granted us one thing then it’s an opportunity to learn from one another, with more time to share best practice. Advisers are not alone, and creating a culture of sharing and collaboration will facilitate quicker growth. We have set up an adviser community group on LinkedIn to enable just that, and we hope that through it, advisers will be able to benefit from tips on working practices and learn from how others have adapted their businesses. We are doing everything we can to support the adviser market and get it back to a strong position economically, but we urge advisers to also make sure they’re doing everything they can to adapt their ways of working accordingly. Think about ways to boost income in the short term, introduce GI as an integral part of your sales process if it’s not already, and take advantage of all the support that is available. The path to recovery might be a long one, but we can navigate it together while we wait for normality to return. M I www.mortgageintroducer.com
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GENERAL INSURANCE
Health and Safety post-COVID-19 Geoff Hall chairman, Berkeley Alexander
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he pandemic will probably ravage the economy and people’s finances for years to come. The impact has been all encompassing and indiscriminate. Beyond the death toll and the financial consequences, for those who survive this crisis the mental impact will also be widely felt. In a business context, those people who want to work from home will have embraced it and all the work-life balance benefits it offers, but home working is not for everyone. Even where it is possible, it is not necessarily always welcomed. The post-COVID-19 reality, though, is that working practices are likely to change for most companies – particularly in professional service industries like ours. As employers, we must ensure our staff are prepared and fully supported to meet those changes. Advisers will be undergoing the same change management.
Suitable IT and a drive towards digital practices and cloud-based systems are, of course, inevitable. We are already seeing this now with the widespread use of video conferencing, for example. Health and safety risk management assessments for homeworkers are already required by law, but not always adhered to by all companies. COVID-19 will undoubtedly raise awareness of this requirement and these will now widely become the norm. Management will also need to consider implementing tailored training on things like supporting employee mental health and how to manage remote workers effectively. At Berkeley Alexander, we launched a health and safety risk management portal last year – available to all our advisers to use themselves and as a service to their clients. It is perhaps not surprising that registrations to the portal have doubled since the outbreak! It’s a valuable tool aimed at helping firms through the health and safety minefield, but it doesn’t just cover the obvious basics. It includes a wide range of modules and e-learning sections on things like working at height, driving at work, business continuity and manual handling, to name just a few. It has also been updated to include COVID-19, and will help firms work through the back-to-work process. Health and safety considerations have been propelled into the limelight. As general insuarance (GI) providers, we took the decision well before COVID-19 that health and safety and risk management should play a vital part in the role of every GI provider and adviser. NOW IS THE TIME TO BEAT THE PROTECTION DRUM
GI products may need to adapt
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Protection products have also been brought firmly back onto the agenda during COVID-19. The pandemic will change consumer habits, and individual circumstances may have shifted, but people will still
want to buy property and take out mortgages that will also need insuring. Whilst on the immediate horizon for some, and very much a reality for others, redundancy will certainly make people more sensitive to their financial protection needs in the future. Mortgage advisers and independent financial advisers (IFAs) will be vital in ensuring clients carefully consider their protection options and make sure they are safeguarded. More generally on GI, we’ve seen instances of clients wanting to ‘cut their cloth’ and sacrifice the quality of their cover to save money. This is clearly a false economy; if their insurance needs haven’t changed, then the advice on what cover is required will be the same – reducing cover in one area will only increase exposure in another. CHANGE OF USE
Commercial property is widely expected to suffer as a result of the ongoing pandemic. In the ‘new normal’ following COVID-19, with a smaller workforce and more of those staff working from home, businesses will be less inclined to sign up to long or costly leases with impressive square footage. As a result, we are likely to see more empty, or part-empty properties and many more changes of use as owners and developers seek to turn empty office space into residential or other uses that are more marketable. Whatever their use class, it is important to remember that these properties exist and will need insuring. GI products may need to adapt to become more flexible to meet the needs of the ‘new normal’, but this changing landscape will rely on advisers to navigate what has, up to now for some, been unchartered and possibly more complex risks and product choices. Advisers and GI providers will need to work closely to ensure the right products and choices are made available for customers, whatever their needs or use class! M I JUNE 2020 MORTGAGE INTRODUCER
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BUILDING SOCIETIES
Small building societies could thrive Jeremy Wood chief executive, Dudley Building Society
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reating a picture of the building society sector in the next one to two years could only be speculative at best, bearing in mind the current situation. Yet, it is fair to say that unlike other institutions involved in savings and lending, building societies like ours are better placed than most, not only to survive but to come out even stronger. If we go back in time to the establishment of the building society movement, the principle of mutual benefit by pooling savings in order to advance funds to build dwellings might have seemed old fashioned in a preCOVID market, one predominantly funded by shareholder capital. AVAILABLE FUNDING
Yet the tried and trusted principles of saving and borrowing through a mutual building society will likely provide the most available source of funding when the market recovers, whereas other sources of capital may take time to come back on stream. On a savings level at the turn of the year, while the returns for savers might have been marginal at best, building societies were offering a better return on average than banks. According to Savings Champion, more than two thirds (67%) of building society accounts paid a higher rate than the Bank of England base rate, which at the time was 0.75%, compared to just over half (51%) of banks. The main point, certainly until the current crisis, is that although returns may be low, immediate access accounts – which make up the bulk of savings accounts – were better served by www.mortgageintroducer.com
building societies than other providers. When the market recovers, there is little to suggest that this will change. In terms of trust and approachability, a glance at the high street shows us that many banks have pulled back from serving local communities. This is usually on the basis of cost, and because more customers are moving to online transactions. While there is overwhelming evidence of the popularity of online
“The mutual model offers a template which should be re-examined as a potential alternative to shareholderdriven businesses” banking, with innovations such as e-savings helping a new generation appreciate the value of saving, for smaller building societies like ours, maintaining a retail presence is not just a business decision. It is part of the unwritten understanding between us and the people we serve. Every piece of research tells us that while our members not only like the reassurance of a physical presence, through which they can withdraw or invest funds, we also provide a bridge and platform, acting as a social as well as a working hub for the community. This identity, linked to our local members and their financial wellbeing, is key to our strength, and building societies like Dudley will maintain their presence on the high street as long as they are needed. We have worked hard to make our branches more attractive to a wider audience, and to align more closely with local charities and organisations, around which the community can coalesce, as can be evidenced by our statement of corporate social responsibility.
Since the 2008 credit crunch, regional societies like ours have been reinvigorated by returning to our roots and making the most of that identification with the locality from which we sprang and the people we were originally set up to serve. Without exception, the last 10 years have seen a resurgence in the importance of building societies, both as alternatives to banks for saving, and probably more importantly in this context, as mortgage providers. At a time when high street lenders have become fixated with lending to a narrow specification, regional societies became particularly adept at providing an alternative source of mortgage funding, based around taking the time to fully understand an applicant’s situation and applying a more holistic approach to underwriting cases. SMALL AND NIMBLE
Providing mortgages for those who do not fit the tick-box mentality adopted by larger high street names has led to a need for a more innovative approach to underwriting and product design, which is a skill which smaller and more nimble lenders like us have been very successful in developing. Lastly, it is a good time to remind ourselves of this: because building societies accumulate reserves over many years and do not pay money out as dividends to shareholders or owner directors and partners, they are better able to navigate the consequences caused by unexpected events like the one we are currently experiencing. In many respects, the mutual model offers a template which should be reexamined as a potential alternative to shareholder-driven businesses, which as we have seen in many cases, do not have the necessary reserves to survive long under less than ideal conditions. The checks and balances that underpin building societies ensure that mutuality represents responsible behaviour in good times and bad. I am therefore confident that Dudley and its fellow societies will be strongly placed to provide funding when it is needed, as we have done through two world wars and countless economic crises. M I JUNE 2020 MORTGAGE INTRODUCER
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EQUITY RELEASE
A change is gonna come... Stuart Wilson CEO, Air Group
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iven the momentous nature of the COVID-19 pandemic and its ongoing impact on the entire property market, let alone the equity release sector, it is unsurprising that many stakeholders are trying to work out exactly what it will mean in the future. There’s no doubt that the impact of the current global crisis is going to be substantial across all manner of different areas. Now, that might not chime with some people, but I think it’s possible to already see the ways in which ‘a change is gonna come’. To be honest, those who believe it’s simply a matter of time before we return to the status quo that was in place before COVID-19 are unlikely to see that hope come to fruition. ADAPT AND LEARN
For instance, in the equity release sector, and especially around the provision of advice, it’s already possible to see the way the market is moving. To that end, advisers are going to have to move with the times; it’s my belief that those advisers and providers which are able to adapt and learn from their experiences during this time will be in the best place to succeed as volumes grow. Take something as fundamental as the face-to-face advice meeting, which has been the cornerstone of the provision of equity release delivery for many, many years. In the past, the default setting has been for the adviser to visit the client in their home, often meaning a large degree of travelling.
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Of course, there are many benefits to seeing the client face-to-face. I’ve written recently about those, especially in terms of protecting potentially vulnerable clients who may be under duress to go ahead with an equity release recommendation because, for example, a family member wants or needs the money. At the same time, it is now possible to see a nation – particularly within the older population – that is becoming ever more comfortable with the kind of technology which allows them to meet people remotely. NEW METHOD
How many individuals have learnt how to use Zoom or other video chat platforms over the past few months? How many might now be entirely comfortable with that, and be willing to speak to an adviser via this method? Many parts of the UK population have been forced to adopt this technology; once you take that step, the fear factor goes and you tend not to go back. Advisers need to react to this development, because there could be considerable benefits in offering clients a video meeting rather than something face-to-face – not forgetting, of course, that some clients might not be comfortable with strangers or outsiders entering their property anyway. We’re already seeing a shift towards this – I know of one example where an adviser is offering clients a discount on their advice fee if they take up the option to conduct video rather than face-to-face meetings. As mentioned, this saves travelling time in getting to that client, which can be dedicated to other important tasks, and therefore there is a saving to be made. It’s certainly worth providing such an option, because I suspect that many clients will be willing to take up the offer.
We might see a greater degree of flexibility in other areas, too, reaping considerable rewards for large numbers of market practitioners. Keeping on top of rapidly changing criteria and product changes will be hugely beneficial, especially if we see further virus waves at regional levels which require localised lockdowns. Advisers in different areas of the country might well experience a very different equity release marketplace depending on how, if and when the much-predicted second wave of the virus follows. Technology is also likely to play a major part in areas such as valuations – throughout the crisis period we have seen a number of providers moving to an acceptance of remote and desktop valuations, and the likelihood is that these could increasingly be used in the future, even with physical valuations firmly back on the agenda. A more tech-focused solution could also allow cases to progress more quickly, and there are clear benefits for advisers and their clients if we are able to get more business through the pipes in a much quicker timeframe, even with the added responsibilities and requirements that accompany the legal process for equity release customers. BETTER OUTCOMES
These are just some areas where we are likely to see post-COVID-19 change, which could ultimately end up delivering far better customer experiences and outcomes. They will require a more flexible approach to advice delivery which, by utilising the latest products and criteria, could drive a better advice service and ensure customers do get their cases processed far quicker. It is a new world, but it is also a better one, even if it has been created by a terrible situation which has required plenty of grit in order to make it through. Once we are able to look back, I think it will be possible to see that this period did allow us to embark on a new phase for the sector, one which can deliver significant benefits for those who are able to grasp the opportunities it presents. M I www.mortgageintroducer.com
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The industry embraces tech Hattie Tales business development manager, Pure Retirement
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e are living and working through unfamiliar times. As an industry, we have needed to react and adjust like never before to ensure business can continue. Where we now find ourselves, and in such a short space of time, is nothing short of incredible. This is down to a lot of long hours and hard work across the board – huge credit should be given to everyone involved. In response to the global pandemic, we have needed to turn the entire equity release process on its head. Industry advisers have been able to either switch from face-to-face advice, or continue with telephone advice when dealing with their clients. Many have also been using video technology to engage the best they can. The challenges that have been thrust upon them as a collective may even change the way many advisers work moving forwards, with more embracing a hybrid approach. The response has shown that many clients are very comfortable with telephone advice, and advisers are able to deliver the required information just as effectively. The legal process was one of the first concerns to overcome. Prior to COVID-19, due to client safety measures put in place by the Equity Release Council (ERC), every client had to attend a face-to-face appointment with a solicitor to demonstrate their full understanding of the product. Due to social distancing rules, this process needed to be adjusted to maintain everybody’s safety. These mobile solicitors were still recognised as essential workers, able to travel to complete these meetings, but with some changes. For example, the client could meet the solicitor in www.mortgageintroducer.com
their garden or agreed outside space at a distance of two metres or more and complete the process in person. Alternatively, they could complete the appointment using video technology, meeting the solicitor virtually instead. There are additional measures to be followed to safeguard the consumer when using this method, but it’s vital to have a remote option available during the global crisis. The biggest hurdle for lenders to overcome was working with the product funders to embrace desktop valuations. Even though some restrictions have now eased, this process will continue, particularly when dealing with vulnerable clients. Unlike mobile solicitors, surveyors were not classed as essential workers, meaning that during lockdown they were unable to make assessments in person. But property valuation is of utmost importance when taking a lifetime mortgage. There are no client affordability checks or mandatory requirements to make repayments towards the mortgage. Lenders therefore need a detailed and accurate report of the
property value and condition to ensure the product details on offer are suitable for both the client and the business. It has been an adjustment for the lenders, funders and surveyors to change to a desktop process, and following a lot of consideration for each party involved, as well as hard work and product safeguards, there are now various competitive products live and available across the sourcing systems. The lifetime mortgage industry is renowned for giving support back to advisers, and the lockdown period has proven this more than ever. Most days there are CPD accredited webinars, video meetings, coffee mornings and support groups offering educational content, and even simply the chance to connect and engage with lenders, clubs, networks and likeminded advisers. It’s certain we will see a refreshed way of working and engaging when lockdown is lifted across the board. The embrace of technology has carved a new way of keeping in touch, educating and connecting with people. It has, quite simply, forced those who shied away to try new methods and welcome change. M I
We will see a refreshed way of working and engaging when lockdown is lifted
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Time to review retirement needs Alice Watson head of marketing and communications, Canada Life
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e’ve all had a lot more time on our hands, whether we’ve spent it thinking about seeing family or friends, or simply doing more household tasks. It has been a period of financial reflection for many, too. Not only has this period made us think about our spending habits, but it’s helped us to understand what is important. For people approaching, or even in retirement, the lockdown has provided an opportunity to consider hopes and aspirations, both short and long-term. Many will be reflecting on the chance to travel when government
guidance allows, some will be looking at improvements around the home, while others want to lend a hand to family, or just have a greater financial freedom themselves. The certainty and flexibility of lifetime mortgages is making them increasingly popular. Our research shows that more than two fifths are using them to clear an existing interestonly mortgage, a quarter to pay off unsecured debts, and nearly two in 10 are putting the money towards daily living costs. Equity release is also being used to enhance lifestyles, with 40% funding home improvements, 22% holidays, and 14% new cars. Some are even tapping into the wealth stored in properties to support loved ones, whether to help them get on the property ladder, go to university or, in some cases, pay for their care. Advisers have a significant role to play, and many are using lockdown as a
chance to engage with clients, not only to help them make the most of their retirement income, but to highlight the role equity release can play as part of a blended solution. As always, it’s important to remember there’s no one-size-fits-all. Advisers are well positioned to help clients decide if a lifetime mortgage is the right choice, recommend the most suitable product and navigate them through the process. Regardless of why a lifetime mortgage may be taken out, it is a long-term commitment. It shouldn’t be rushed into, and for some clients, downsizing or spending other assets such as their savings or investments may be a better solution. Ultimately, it’s important for advisers and their clients to discuss their evolving needs in retirement, and with all this extra time during lockdown, now is as good a time as any. M I
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EQUITY RELEASE
Equity release must adapt now Claire Barker managing director, Equilaw
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ith social distancing measures looking likely to remain in force for the foreseeable future, it is essential for financial service providers to adapt and to cater to the requirements of customers at a time of unprecedented disruption. Yet, easy answers remain limited. In last month’s article, we discussed the pivotal role that equity release (ER) could play in enabling retirees and elderly property owners to access vital sources of revenue during the crisis, and the steps taken by the Equity Release Council (ERC) to ensure that product safeguards are maintained throughout this period. ADVICE RULES CHANGE
The results of this consultation were published at the beginning of April, with a coalition of mortgage providers, funders, financial advisers and legal representatives agreeing to a temporary modification of legal advice rules – a move which has received widespread support from the independent consumer and regulatory bodies that comprise the ERC’s Standards Board and beyond. These measures, which will remain in force for the duration of the lockdown, allow clients to access legal advice remotely, with advisers offering a combination of written advice and documented video or telephone conference calls to establish the identity of clients, determine whether they have the mental capacity to enter into a given contract, and ensure that they have not been subjected to any duress or coercion. The revisions will also allow clients to sign mortgage deeds in the presence of an independent adult witness of their choosing (subject, of course, www.mortgageintroducer.com
to the usual identity checks and due diligence), thereby allowing the ER industry to continue offering its services at this crucial time, while ensuring that transactions are subject to the stringent legal standards enshrined within the ERC’s guidelines. In cases where sufficient checks cannot be carried out, applications will be suspended until social restrictions are lifted, meaning that the best interests of customers are maintained and protected. In short, the consultation was a collaborative triumph. This package represents a clear victory for both the principles of common sense and the needs of vulnerable customers at a time of great uncertainty – a timely and considered response to an era-defining event, while also allowing for innovations that can be used to maintain service standards across the sector. This is a perfect example of the adaptability that financial providers should be prioritising. For example, some lenders (such as Aviva, Canada Life, more2life and OneFamily) have sought to overcome current restrictions on movement by revising their valuation policies. Remote appraisals have been used to support client applications in some cases, and semi-automated procedures involving desktop or drive-by valuations by surveyors with detailed knowledge of local areas in others. In addition, suppliers such as LV= are attempting to encourage an uptick in ER business among advisers by simplifying their application process, allowing for claims which would normally require a customer’s signature to be accepted via email confirmation or telephone – a fantastic boon for businesses and customers alike. While these measures are being implemented as a matter of necessity, there is also an argument that some features could help to augment or reorder business practices in the years to come – redefining the way in which customers and suppliers interact, while
bowing to the needs and preferences of a changing society. TECH’S VITAL ROLE
Research by digital services adviser Abaka and ER provider Key has suggested that technology is likely to play an increasingly vital role in the way that elderly clients research ER options. A significant proportion of the customers that were surveyed as part of the report (aged between 65 and 75) expressed a preference for provider websites and AI-powered chatbots to gauge the suitability of ER options and product choices. The research also concluded that clients are becoming less inclined to provide personal details or enter into contact with an adviser at the early stages, preferring the anonymity and lack of judgement that a purely digital approach can offer in the short-term, while compensating for a dearth of intermediaries actually qualified to advise on ER in the first place. Face-to-face advice continues to be regarded as a fundamental part of the application process by most consumers, and there is little evidence to suggest that an end-to-end digital process is favoured by all but a minority. However, if technology is to assume a growing influence among age groups that are traditionally seen as being resistant to it, then some of the measures taken at this time may be compatible – allowing for the primacy of face-to-face legal advice, of course. In other words, necessity really is the mother of invention. Either way, the sector can be justifiably proud of what it has achieved, acting as a clear example of what can be accomplished when an industry pulls together. Moreover, recent figures from Age Partnership revealed a jaw-dropping 13% monthly increase in customers requesting quotations during March. The demand is undeniably there, but businesses can only profit from this upsurge if they learn to adapt and take the necessary actions. M I JUNE 2020 MORTGAGE INTRODUCER
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Pros of exchange and completion in one Tom Bessant partner, commercial property department, Parker Bullen
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n April, Zoopla estimated that around 373,000 property transactions, with a total value of £82bn, were on hold. Since then, the position is quite likely to have worsened, as many have become even more concerned about moving, often due to economic uncertainty. The stark reality is that tens of thousands of home owners have already been, or are likely to be made redundant as companies emerge from lockdown and furlough funding ceases. The result is that many transactions will no longer go ahead, and continued uncertainty over the trajectory of the pandemic means that even the most committed buyers and sellers will be nervous of exchanging contracts. One problem with the system of conveyancing has always been that of the ‘chain’ of transactions. It is not unusual to see chains of five or more transactions, all of which fail if just one buyer or seller drops out before exchange of contracts. Usually, however, once contracts have exchanged the parties can be confident that matters will be successfully completed on the agreed completion date. The current crisis has introduced a great deal of uncertainty, however; there are very real risks that one or more transactions in a chain might be affected by a COVID-19-related problem, such as a seller having to selfisolate, removers being unavailable, or transfers of funds being delayed. In such circumstances, every transaction will be delayed, with consequent costs, including additional legal fees for dealing with the service
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or receipt of a notice to complete, payment of penalty interest under the contract, and other consequential losses such as removal costs, storage and temporary accommodation. At worst, transactions might fail to complete at all, risking the loss of a 10% deposit due to failing to complete within 10 working days of a notice to complete having been served, in addition to claims for damages for breach of contract. It is also worth noting that, if sale and purchase transactions fail to complete, then mortgage advances will need to be returned, and brokers will not receive their arrangement fees from lenders. WITHDRAWN OFFERS
Worse still, the current uncertainty over jobs raises another frightening prospect for anyone contemplating entering into a purchase with the help of a mortgage. It has always been the case that lenders retain the right to withdraw their offers of mortgage finance if, for example, the borrower has overstated their earnings, or their circumstances have been subject to a change. In more normal times this is a known and generally acceptable risk for borrowers to take when committing to an exchange of contracts.
Buyers and sellers are looking for greater confidence
The situation looks very different today. Buyers and sellers are rightly nervous when it comes to exchanging contracts for completion in a few weeks’ time in circumstances where there is significant risk that they, or anyone in the chain, might have their mortgage offer withdrawn. Our experience of conveyancing during lockdown has shown that, by dealing with the transaction through a simultaneous exchange and completion, it is still possible to get through the process, and to do so in a way which minimises the parties’ risks and leaves none of the uncertainty that the period between exchange and completion usually creates. In the future, at least while we are living in uncertain times, we are likely to see behavioural change among both buyers and sellers, with those that want to move having a much firmer commitment to a sale going ahead. While it is true that if one party in a single transaction or chain changes their mind at the last minute then the whole arrangement still collapses under simultaneous completion, our experience over recent months is that this is less likely to happen. Both simultaneous and deferred purchasing present shared issues; for example, if one party pulls out then unnecessary removal costs and other potential ancillary costs associated with the move could be incurred. However, as mentioned earlier, the costs associated with the failure of a conventional exchange and completion are potentially far higher. Plainly, the most appropriate conveyancing process will be dependent on a number of different factors, and will most likely evolve as the market does. That said, in my opinion, the risks a simultaneous exchange and completion avoid, and the psychological advantages provided by a process that is completed in a single transaction, are currently far greater than the disadvantages attached to it. I would therefore urge brokers to discuss that option with their clients, rather than leave the decision to the client’s lawyer, who most likely will opt for the status quo. M I www.mortgageintroducer.com
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CONVEYANCING
Get ready for the double whammy Mark Snape managing director, Broker Conveyancing
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or the past four years or so, we’ve all been dealing with what would appear to be ‘the great unknown’ when it comes to the future of the UK economy in general, and specifically the housing and mortgage markets. During 2020 that really hasn’t changed, however whereas in previous years that ‘great unknown’ has been as a direct result of what might happen post-Brexit, we now find ourselves – at least in the short-term – thinking about what might come next postCOVID-19. It is of course interesting that Brexit hasn’t really gone away at all but our focus and priorities have shifted towards the coronavirus pandemic, for obvious reason. In a sense we are about to go through something of a ‘double whammy’ in terms of not knowing – i.e. what will happen post-pandemic, followed closely behind by what happens at the end of the year when it comes to the EU? Deal or no-deal? UNCERTAIN FUTURE
So, in a sense, all property market practitioners should perhaps be used to working within an environment where the future looks less than certain. However, whereas Brexit has been something of a slow burn, COVID-19 hit quickly, rapidly and with maximum force. In a very true sense, everything changed pretty much overnight, and the market that we had back in January and February seemed a world away from what we were left with during March, April and some of May. It will now be interesting to see how that market situation shifts again, given that – at the time of writing – there has been a relaxation of the lockdown in www.mortgageintroducer.com
England with the anticipation that other countries will follow suit shortly. If we wanted an idea of just how quickly the peaks of business activity can be replaced by the troughs, then we only need look at the recent data issued by Search Acumen, which highlights conveyancing volumes. Back in January 2020, 104,325 transactions were recorded in England and Wales – which just so happened to be the largest number since April 2016. Fast forward to March this year, and that number had dropped by close to half, down to 55,381, the lowest since April 2013. Even with the lockdown kicking in during March, Q1 2020 was up on Q4 2019, however I think we must all anticipate that April-May-June 2020 figures, are likely to be considerably worse than anything we have possibly seen in the last decade. MAJOR CHALLENGE
Dealing with these ups, and especially, the downs of the property market was always going to be a major challenge for any property practitioner, whether you’re an adviser, distributor like ourselves, conveyancing firm, lender, the list goes on. But this crisis has been like no other – the hit in terms of its ability to be ‘nasty and brutish’ is going to be considerable. We’re already seeing this in terms of falls in GDP and the impact on employment. The big question remains of course, just how ‘short’ this period will be. Will we get the much longed-for V-shape bounce back or will it simply take a longer period to move towards economic growth again? I suspect that we will be waiting until 2021 before we see any return to an economic pre-COVID-19 reality, but the hope is that we can be catapulted forward when more lockdown measures are eased. That being the case, one of the key strategies for all firms, particularly advisers, has to be flexibility and an
ability to remain fleet of foot when it comes to securing business and completing it. That’s an important point because there may be ebbs and flows in demand, but it’s also the case that the mortgage market, for example, in terms of affordability and criteria may look very different to what it did just four to five months ago. Lenders are now having to take into account furloughed income and the potential that borrowers might not have the job they currently hold in a few months’ time. CONVERTING LEADS
The appetite to lend might be there but the risk is likely to be perceived as greater. Clients who would have been a shoe-in for purchase or remortgage finance at the start of the year, might not be accommodated as willingly now and converting leads all the way through to completion might well be more difficult, require more work and may ultimately not even get that far. Having that business flexibility to be able to shift towards other product areas is likely to be crucial – what client wouldn’t be open to a conversation about protection now? What client’s circumstances haven’t changed? How appropriate are their current insurances? Who do they trust most to look after their purchase/remortgage conveyancing needs? Would they want to go elsewhere for those product and service needs, when they might anticipate them all coming from you, their adviser? ROLLING WITH THE PUNCHES
This period will be a ‘moveable feast’ in that regard and it’s important for firms to roll with the punches, and perhaps shift their business focus as and when required, and as and when demand changes. Having all those product options at your fingertips will allow you to do this – don’t let any stone go unturned for the foreseeable future. M I JUNE 2020 MORTGAGE INTRODUCER
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CONVEYANCING
Digital change has been accelerated Steve Goodall CEO, ULS Technology
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ockdown has taught us many lessons, but one that is particularly poignant for me has been the speed at which all of us have adapted to working from home and, consequently, our uptake of digital ways of doing things. There are sectors where transacting online has long been established, retail being the obvious example. The shops that have endured, and will continue to do so, when the coronavirus crisis hit the UK and forced the country into strict social lockdown are those with strong ecommerce capabilities and a flexible attitude to changing processes. The meteoric rise of companies such as Zoom, which now underpins millions of business communications, is another example of how the changed way we work is affecting the broader business environment. The mortgage market has always been slow to adapt to digital change, but the COVID-19 world is forcing its hand. Under lockdown, surveyors have been unable to conduct physical property inspections, estate agents were barred from showing people’s homes and purchase transactions collapsed. Rather than accept this state of affairs, however, innovative firms offering digital solutions to the problem of lockdown sprang up – fast. Virtual property tour provider Made Snappy has reviewed millions of Rightmove listings over the past six months and discovered a huge uptake in agents using virtual tours and videos on listings. Lettings adverts with virtual tours exploded by 179% between November www.mortgageintroducer.com
2019 and May 2020, while lettings adverts with virtual tours and videos rose 44% and 63% respectively in just four weeks between April and May. Although less pronounced, property sales adverts with virtual tours also increased, by 77% between November 2019 and May 2020, and sales adverts with virtual tours and videos rose 19% and 26% respectively between April and May. ENQUIRY INCREASE
Another proptech firm, online lettings service Home Made, said it saw a 120% increase in enquiries, and forecast this rise to continue to grow. A further example, Pupil, is a spatial data company that captures and publishes 3D information about realworld interiors on an industrial scale. The company has had a record number of orders since the lockdown began, with the number of virtual tours it has provided up 110% and 4,200 viewings delivered in just one week. Virtual valuations have also come on leaps and bounds. Several lenders, including Shawbrook and Paragon, have been accepting valuations carried out remotely using a combination of data-driven automated valuation models (AVMs) and sense checks from surveyors reviewing valuations. SimplyBiz worked hard to develop a number of options designed to support virtual valuations, allowing vendors to use smartphones, cameras or laptops to capture and share high-resolution photographs and video footage of the property with a chartered surveyor. Video conferencing technology options such as Skype or Zoom have also been used to take valuers on virtual inspections of properties. Although the market breathed a palpable sigh of relief when the housing minister announced in mid-May that physical property inspections could resume within strict guidelines, it is
nevertheless likely that this increased reliance on digital approaches across the market will continue. While the Land Registry has remained reluctant to accept deeds signed electronically, even under lockdown, it is likely that the strides taken elsewhere by official bodies to adapt to digital alternatives will eventually have an effect. Indeed, even before anyone had heard of coronavirus, the Law Commission published guidance last September suggesting that e-signatures could be witnessed online, which several leading law firms have said should influence how the Land Registry views this in the longer term. The speed with which our industry has adapted to the changed world we now live in is extraordinary, and must be applauded. Making sure to capitalise on this momentum is the next big challenge for those in the mortgage and housing sectors. It is unlikely that the ‘new’ world will be entirely digital – committing hundreds of thousands of pounds to buy a home you have never stepped foot in is not going to be comfortable for most people. At ULS Technology, we have been strong advocates for increased digitalisation of the processes underpinning a property transaction for much longer than lockdown. Our own portal, DigitalMove, which supports encrypted and protected communications and document transfer, as well as storage online, for solicitors, brokers, lenders, vendors and purchasers, has proven extremely popular in the 18 months since we launched it. Over the past few months, the platform has truly come into its own. While obviously we are pleased to be doing our bit to support the transformation of property transactions into online experiences that are both transparent and efficient, we are also constantly mindful of security. As more of these processes move online, cybercriminals will inevitably up their game alongside. The security and validity of online platforms will become increasingly vital in this new world. M I JUNE 2020 MORTGAGE INTRODUCER
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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
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doubt very much whether the sector’s motley crew of surveyors read my monthly diatribe. They’re far too cerebral for this sh*te. Their literary subscriptions are more likely to be to Sudoku Monthly or The Norfolk Broads Revisited, by J.R. Hartley... And despite last month’s unsubtle nudging I’m certainly not taking any credit for the recent up-tick in physical valuations... especially as several lenders have told me OTR that A) they themselves were getting pelteds from brokers regarding un-booked valuations and becoming weary with carrying the can for our absent cousins and that B) the panel managers themselves finally woke up and smelt the coffee. Not before time, you might add. Behind closed doors, the post-COVID world will produce some priceless fly-on-the-wall moments and navel-gazing in the months ahead. Whilst the government is (rightly) held to rigorous account for its chronically complacent and ill-prepared management of the pandemic, we too will be looking back and hoping to collectively learn from the past three months’ events. Staying with surveyors briefly, lenders
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might well be score-carding their panel managers via some revised metrics in future. For if the virus (or something equally disgusting from China) comes our way again, surveying firms should have no excuses for not being better prepared second time around. Not all PPE kit has a short shelf life. Much of it can be bought and stockpiled. And decisions around furloughing almost an entire workforce of surveyors when desktop valuations still require doing will be more circumspectly assessed. Lenders too will hopefully be planning already for a COVID sequel should it come. Barclays for instance must surely be questioning the wisdom of having so much of its support function based overseas? Many brokers I’ve spoken to have lost faith in the lender through this period. Apart from the product withdrawals and service issues around case updates etc., its responses on matters pertaining to valuations (and some ridiculous down-valuations and/or the non-usage of desktops in extremely low LTV cases) has been inadequate. NatWest is another fabled lender which needs to review an aspect of its own approach crisis management. Blessed with the arrival at last of Miguel Sard (who BTW definitely puts one in mind of the stylish professor on Netflix’s iconic Spanish masterpiece, Money Heist?) will have watched on as more as more brokers grew frustrated with the bank’s refusal to engage in telephonic discussions with brokers. Its digital chat room medium is excellent. That’s a given. But why did it cock a deaf’n to Troy Deeney: Overpaid and over-rated Photo: Cosmin Iftode / Shutterstock.com
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brokers’ actual calls? If the actor Tim Robbins (from Shawshank Redemption) had been a broker, then he might well have labelled this as somewhat obtuse? Thankfully, NatWest does now appear to be back at full throttle and as the industry’s unquestionable number one operator of the past decade, hopefully this was just a blip. For every behavioural blemish, there were of course also examples of undoubted excellence and the gold star unhesitatingly goes to HSBC. When others ran for cover at the higher LTV bands, and when desktops were only selectively being considered by others at some very curious LTV levels, HSBC strode through the abyss. Well done to them. Proof that you can occupy a large building in Canary Wharf with a skeleton staff and still be efficient (Barclays and the FCA please note). In their wake came a flotilla of smaller lenders. These lenders were prepared to make fleet-footed policy decisions and most importantly, were consultative and helpful in explaining why certain protocols had to either be curtailed, but in most cases, thankfully preserved. They include an impressive showing from Coventry Building Society, Skipton, Accord and Nationwide. I’ll let the reader join the obvious dots in terms of which was the stand-out here! The same can’t be said for the specialist players. Some of these such as Interbay patently widened their margins and pulled up the drawbridge... essentially because they COULD! Clydesdale-Virgin is hardly a challenger bank anymore. But it too seemed to take a harsh approach to underwriting self-employed and/or furloughed applicants. I’ll return to the lenders shortly. Because not surprisingly the crisis also exhibited the best and worst of behaviours in wider society. Step forward this month’s foremost covidiots; First, Watford FC ‘s Troy Deeney. This is a grossly over-paid and over-rated footballer who in the past has accused others (notably, and rightly so, Arsenal’s little snowflakes) of lacking “cojones”. Diddum’s... poor Troy is now seemingly reluctant to return to work himself in case he
Money Heist:.. That you Miguel?
Kevin Purvey: Impressive showing from the Cov
contracts the virus. And he’s the bloody Captain there! Indeed, if it’s genuinely true that a “frost kills off the parasites” surely one beneficial outcome from COVID will be a resetting of sports stars’ revenues. Let’s face it, have most of them really been that missed on our TV screens amid our nationwide gorging on Netflix, re-runs of Ing-er-lun from 1996 and 1966, and the febrile soft-porn expositions in the BBC’s excellent Normal People? A salary cap is long overdue across most sports, and if it weren’t for the grotesque funding provided by the TV companies we wouldn’t have to read every day what classless oafs such as Kyle Walker and Lewis Hamilton think about the world. With most multi-national companies now taking a scalpel to their TV advertising budgets hopefully Sky and BT’s coffers won’t be so full from now on. Misplaced and noisy opinions were also heard in recent weeks from covidiots such as Emily Maitlis. For her £230,000 a year salary, Maitlis took it upon herself to totally go feral with her pernicious stance on the Dominic Cummings saga, all at our licensepaying expense. Gobby Emily’s polemic outburst is partly driven by her having 400,000 social media “followers”. But it also has its roots in the success of her highly successful grilling of Prince Andrew. A clear example of the Icarus factor if there ever was one - a broadcaster flying far too close to the sun. She needs to shut her trap and just report the news, not try to make it. Silence. That is what we need more of at the moment. And what we are thankfully now getting that from two more of the covidiots, John Bercow → JUNE 2020 MORTGAGE INTRODUCER
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THE MONTH THAT WAS and poor little Daay-vvid Beckham. Our Dave from Leytonstone, E17 is apparently still fuming over the lack of a knighthood, and with the prospect of thousands of key workers rightly being honoured in the next two Honours Lists, the follicallychallenged one may have to wait a little longer. Equally, Bercow won’t be enobled as lord anything, anytime soon. Jeremy Corbyn’s recommendation that he ought to be has been passed over by Boris until such time as the investigation in several claims of bullying against him have been heard. And finally in the world of celebrity we had covidiot number five, Steve Coogan. Worth north of £10m, Alan Partridge chose to furlough his gardeners. Just who gives these people their PR advice? It’s probably the same numpties that advise the FCA on its strategic thinking. If it wasn’t bad enough that they are still taking an eternity to get to grips with their “work” on surveying consumers regarding their inertia or inability to remortgage, its latest tactical masterstroke amid the destructive heat of COVID’s flames was to... yep, you guessed it, send out another survey! Their hegemony is consistent if not breathtaking. If the FCA was a roman dictator (!!), then it would clearly be Nero. And whilst the government, mortgage lenders and local councils extend grants and payment holidays, it’s still all quiet at Canary Wharf on the matter of fees. No doubt they are all on furlough, and watering their gardens 24/7. OK. Back to our own world and the economy that underpins it. What is the next six weeks going to look like? My hunch now is that we won’t get the V recovery that dishy Rishi hoped for. But equally, it won’t be a U shaped one either. It will possibly land somewhere in between the two. In the housing market the prospect of widespread gazundering thankfully won’t materialise. Not least because a buyer with a confirmed offer letter may not want their own employment circumstances reviewed again by their lender. Further, if they did secure a 10% reduction in the actual purchase price then they might be tripped into a higher LTV band and a more expensive product (should they not wish to stake more of their deposit). Anecdotally, we know that four in every five purchases which sat in pipelines as of March 23 should still progress. And in a bizarre fashion, a pipeline-unblocking August could be a near-record month for UK property completions which will be just in time for many businesses who may find that the true nadir for revenues will have actually been June and July, and not April or May when pre-COVID pipelines got may through the initial ravages. Our thunderbird-like Chancellor may also find that the furlough scheme has possibly been overextended. My hunch (based on a dozen or so pals
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Steve Coogan: Needs better advice Photo: Featureflash Photo Agency / Shutterstock.com
of mine across all walks of life) is that too many folk are more than happy to either work from home indefinitely, or to be on furlough. These people are no longer feeding the economy with rail fares, fuel purchases and lunchtime visits to Starbucks and the multitude of retail outlets which are now open. Which brings us back full circle to the lenders and surveyors. And a request to each. Surveyors... PUL-LEEESE... STOP valuing some properties on the assumption that they are now worth 5 - 10% less! If the buyer and seller are aligned, then just get on with it for now. The time to render those kinds of haircuts is in three months from now when we have clear trend lines based on actual hard evidence and post-COVID comparables. Stop guessing. To lenders, it’s an easy one. Via your commentariat bodies such as IMLA etc. you all pretty much talk to each other. Pick up the phone to Chris Pearson at HSBC and Kevin Purvey at Coventry BS and just ask them how they managed to navigate the crisis so much better than most. Because if God forbid we find ourselves here again, there can be fewer excuses next time around on not maintaining a more consistent and collaborative approach with the nation’s 10,000 mortgage brokers, many of whom have had to take some real medicine this past three months and who still have a very challenging three months ahead of them. M I www.mortgageintroducer.com
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THE ROAD TO RECOVERY Jessica Bird breaks down the discussion between Mortgage Introducer’s most recent round table panellists, from product changes to market predictions
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rom supporting staff wellbeing through to reshaping products and policies, lenders such as NatWest have had to make vast changes in a short space of time due to the effects of the COVID-19 pandemic. As the market starts to reopen and green shoots tentatively appear, Mortgage Introducer’s Robyn Hall caught up with NatWest, as part of an ongoing series of round table discussions. The conversation, joined by the Association for Mortgage Intermediaries (AMI) and the Intermediary Mortgage Lenders Association (IMLA), considers the key shifts seen over the past couple of months, as well as looking ahead and considering how the market as it might emerge on the other side. BUSINESS IN THE NEW NORMAL One of the key challenges brought about by lockdown, indeed for businesses across the board, was the logistical issue of the shift to home working. That was the same for NatWest. Mark Bullard, head of sales at NatWest Intermediary
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COVER Solutions, says: “We’ve mobilised across the bank in excess of 50,000 staff, who are working from home with the desired equipment to enable them to help to help customers.” David Hunter, corporate account manager at NatWest Intermediary Solutions, adds: “For somebody that’s used to working in an office environment and [is then] working from home, initially it’s fine, but it can change, and we need to make sure we adapt the support we provide to our colleagues. “We’ve undertaken a survey right across the group to establish how colleagues are adapting, responses to what we’ve done, and what we might need to do going forward in relation to their wellbeing.” Looking beyond internal logistics, NatWest has also adapted by providing an automated system for payment holiday applications, while implementing a coronavirus hub to help brokers understand key decisions and changes in policy. Bullard says: “From an intermediary point of view, and the wider mortgage business within NatWest, we’ve looked to try and realign our resources and processes to enable us to make some decisions quickly.” This reflects changes being made across the market, which Kate Davies, executive director of IMLA, describes as impressive. “The degree of rollout of IT to people’s homes has been quite mind-blowing,” she says. “My perspective is that lenders are trying very hard, and hopefully it’s been as positive an experience [for intermediaries] as it could be in very difficult circumstances.” Robert Sinclair, chief executive of the AMI, adds: “There will always be criticisms of any change or situation like this; however, the broad view from the intermediary community is that lenders have stepped up enormously well, given the challenges. “To move that number of people to home working in the time they did, while facing the number of calls they were getting from consumers, whether on consumer credit or mortgage deferment, was absolutely an exemplary performance from a range of businesses.” In addition to meeting these logistical challenges, NatWest has included wider social and economic issues in its approach, from charitable donations to its accreditation under the Coronavirus Business Interruption Loan Scheme (CBILS). Bullard explains: “Our appeal with the National Emergency Trust has now surpassed £5.5m, and that
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helps support charities in local communities. “We’ve been helping businesses of all sizes, both in terms of direct financial support and obviously the government initiatives that have been launched. “We’ve also got dedicated phone lines for NHS staff and those that are vulnerable or elderly.” WITHDRAWING AND RECUPERATING Some of the changes being made by lenders have had to be reactive in the face of economic uncertainty, such as the withdrawal of lending at higher loan-to-value ratios (LTVs). According to Mortgage Brain’s weekly tracker, available product numbers dropped to a low of 7,477 during the week of 6 April, around half of the prelockdown average of 14,693. This has been steadily building since that low point, but has as of yet only risen to 8,635 as of 27 May. Sinclair says: “While [intermediaries] were critical of perhaps seeing higher loan-to-value business disappear for a period of time, we’ve got back to what I would call reasonable levels as we begin to see surveyors come back out of furlough, clear the pipeline and begin to work towards a more normal market. “I wouldn’t fault lenders at all in terms of what has been an exceptionally difficult time, where everyone has had to make difficult business decisions and [face] enormous challenges about trying to just service the existing customers and make sure we’ve all got businesses at the end of this which are sustainable in the long-term.” NatWest has also had to make other changes and sacrifices to fit with new types of demand. For example, in the process of arranging around 220,000 payment holidays for its customers, some resources had to be pulled from the lender’s broker support line, which was replaced with email capabilities. Hunter says: “We’re reviewing everything as we go forward, but there has been a considerable amount of activity to ensure that the service we’ve maintained to-date can continue and be as effective as possible.” This forms part of a wider approach, seen across the industry, to protect existing client bases, in lieu of reaching out to create more business. Davies says: “For lenders, certainly to begin with, the focus was very much on existing customers – trying to deal with the volume of calls coming in. As we saw, there was a huge demand for payment deferrals. “This also caused a lot of lenders to pull products →
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COVER simply to make the whole thing more manageable. “It’s a question of capacity, really – if you’ve got a lot of staff at home, some of them having to self-isolate or with family members to look after, you don’t want to complicate things more than you absolutely have to. “For our non-bank members, up to 30% of customers have gone for payment deferral, which means a lot of talking to people, holding hands, talking through options. That’s been the focus, more than on any new deals.” During a time of mass withdrawal from the market, however, NatWest has also found the space to implement new initiatives, most notably the provision of additional borrowing during product transfers, which came into force towards the end of May. Bullard says: “We are really delighted about the propositional change here, and we’ve had a lot of positive feedback. “[The policy gives the client] an opportunity to consider that as an option with their customers at the point that they’re reviewing those deals. “It becomes more important certainly since going into the pandemic – brokers were very much focussed in on their existing client banks to start with, so what we’ve wanted to do is provide some more options.” PUSHING THROUGH THE PIPELINE As England slowly eases its way out of lockdown – initially with the return of selected workforces, including surveyors, and most recently with the announcement that retail of all types will be allowed to reopen – those transactions and applications put on hold for the past few months are able to progress. Eagerness to coax these green shoots into the open has, however, led to some frustration about the speed of progress through lenders’ backlogged pipelines. Bullard says: “We do require some patience – being one of the last lenders that had to reduce the LTV offering, we’ve inevitably got a large pipeline to work through. “[But] we’ve done some practical things to turn around and alleviate the situation. We’ve got an increased number of surveyors that we can go to with a clear plan of action. “We’ve also, like most, used [automated valuation models (AVMs)] and desktops where appetite allows. “We’ve either completed or booked circa 70% of our backlog, so we’re in a good place, and that’s improving day-on-day.”
Davies adds that the market must remember that it will not be smooth sailing for all pipeline cases. While physical valuation can recommence in theory, in practice social distancing, and isolation for those most vulnerable, must continue. Nevertheless, while the backlog might make for slow going in some places, there is still a promisingly low number of cases that have actually fallen through. Davies explains: “We had a discussion last week on how the pipeline was looking and what proportion of cases have dropped out for whatever reason – it didn’t seem to be that the lack of valuations was what was killing some of the deals, it was other things, such as being uncertain about future employment or income. “But it was a relatively small number of cases being pulled, which was quite heartening. So it suggests that the pipeline has been a bit jammed, but once it starts freeing those cases should come through.” Sinclair adds: “On the ground the noises have been relatively positive in terms of valuations coming back in numbers that were what were expected, as opposed to being significantly down. “The chains have been holding up remarkably well, much better than anybody expected, apart of course from where you’ve got issues with people’s income having changed between the point of application and now – clearly there’s got to be appropriate declarations to lenders around all of that.” EMBRACING CHANGE One result of the enforced move to home and remote working has been the sudden revolution in technological capabilities, among businesses ranging from those already on the cusp of becoming more digital, to those that have traditionally been resistant to change. Sinclair says: “The other thing we’re seeing is the tech firms enhancing their offering as well, making it easier for brokers to do things remotely using video and voice technology – [that is] something that will change the landscape forever to a degree.” Implemented as a necessity during a trying time, technology, digitalisation and remote working may well become factors that heavily influence the future of the market, with businesses likely to maintain some aspect of their current arrangements, even when coronavirus is a distant memory. “The thing that will drive it more than anything else is consumer demand and expectations,” says Davies. “We’re all getting so used to doing everything from
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COVER home and being much more comfortable with video calls and with tech. It’s not even a generational thing any more. “If consumers are comfortable talking to brokers by video links, why wouldn’t you?” This is not to say the future market is likely to be contact-free by any means. Indeed, Sinclair argues, no matter how effective and prolific the take-up of virtual communication, the human touch will always be part
“During a time of mass withdrawal from the market, NatWest has found the space to implement new initiatives, most notably the provision of additional borrowing during product transfers, which came into force towards the end of May” of this industry. “When we’ve got fully formed relationships where everybody knows each other, it’s easy to move into remote working,” he says. “I think as we migrate, go forward through this, and as people change jobs and realign, we need to re-establish relationships. We, as human beings, are social animals, we’re not used to operating in this environment. “We will need to come back to meeting each other again and using offices or meeting places in order to cement and work these relationships through in the longer term.” Considering the more immediate future, panellists turned their thoughts to the issue of LTVs, which at the moment appear to have plateaued at around 80% to 90%. According to Davies, this situation will change, but is unlikely to do so any time soon. “There was a lot of doubt in the early days about what might happen to house prices, which had a lot to do with those higher [LTV] cases,” she explains. “And also just the sheer amount of extra work needed to assess affordability and to underwrite the high LTV cases. “There was a retraction or shrinking in the products that were available for those practical operational reasons, so as those things begin to sort themselves out there will be a return, but it will be gradual. There’s
a lot of caution out there at the moment, inevitably.” For NatWest, specifically, this is a situation to be monitored on an ongoing basis, with too many unknowns at the moment for a clear timeline to be decided. Hunter says: “There’s so many things that need to play out, and that we need to fully understand, not least of which are unemployment levels and property values. “The main thing to recognise is that we will support brokers and customers as much as we can within the circumstances they find themselves in now, but also being mindful of what may happen going forward.” WISHLISTS FOR THE FUTURE There are a number of lessons that the panellists would like to carry forward into the post-COVID-19 world. For Bullard, NatWest’s reactions during the pandemic have been as much about improving services as they have about merely coping in a crisis. He says: “I hope the sentiment remains, first and foremost. What can we learn from what is a very unique situation, and can we take that and continue on? “So, some of the things we’ve seen [related to] pace of change, use of tech, decision-making – they have only gone to benefit both the broker and customer as far as their journey is concerned from end to end.” Meanwhile, one of the items on Sinclair’s wishlist for the market is an increased focus on the topic of protection. “The challenge advisers have is making sure people buy houses to build homes in – for the right reason, at the right price, in the right way,” he says. “The other part of this discussion is not just the mortgage, but is it a fully protected mortgage where the right things have been done to buy insurances around it as well? “That’s one of the issues that might come out of the back of this – advisers are reporting it’s much harder to have protection discussions online. “In order to get the right discussions around mortgage and protection we may see a migration back to face-toface in those firms that are passionate about making sure it’s a fully protected mortgage rather than just a mortgage.” Davies’ image of the future, for brokers specifically, is also a fundamentally human one, despite the advancements taking place at the moment. “The mortgage can’t be looked at on its own, there needs to be a really holistic overview of people’s →
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COVER financial health and wellbeing, and that’s a big job for mortgage brokers,” she explains. “There does need to be this open and holistic view of people’s finances and how their financial lives and financial planning are going to work going forward. “A couple of years ago people were saying that APIs and AI were going to be the end of the broker as we know it, [but] the more complicated life becomes the more we need a human on the end of it to try and explain it to another human.” Certainly, with mass changes to employment status and financial health, as well as the uptake of support systems such as mortgage payment deferrals, complicated financial histories are likely to become the rule, rather than the exception. THE ROAD TO RECOVERY Individual businesses may emerge from the pandemic with newly shaped customer and employee journeys to show for it, but there are also broader elements that the AMI and IMLA would ask for as part of the market’s recovery as a whole. In May, IMLA published a report that suggested current stress testing and controls on higher loan-toincome (LTI) lending was preventing the growth of home ownership among first-time buyers (FTBs). Despite seeing a resurgence since 2008, the report found that actual numbers of first-time buyers at the end of 2019 in the UK were 150,000 lower than predicted levels. Addressing this issue could be the key to boosting economic recovery and prompting more people to engage in genuinely new lending. “We are stress testing at an unrealistically high level, particularly with interest rates currently so low and likely to stay very low,” says Davies. “So it’s really just inviting the regulators to ask, is the market working really the way you wanted it to? And if it’s not, what are the sticking points? “It would appear that the affordability rules plus the stress test are a sticking point, so it’s a good place to start asking them to review it and taking a good look at whether they think it’s preventing a number of people from borrowing who could afford to repay and could be on that ladder.“ Sinclair adds: “One of the biggest risks around that FTB market is that, with the limitations about availability of anything above 85% to 90% lending, consumers are getting driven into the new-build market with Help to
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Buy. The argument says it would be helpful if Help to Buy in its current guise was extended, rather than the regional changes which are due.” Another element to be considered as part of the road to strong economic and market recovery, Sinclair continues, is the role of the Financial Conduct Authority (FCA) in supporting not just consumers, but the intermediary market. “They’ve done a great job in aligning themselves into making sure that the consumers in the UK can deal with the financial impact, in an outstanding way,” Sinclair explains. “We now need to see them turn to make sure the industry can come out the back of this as strong. “That will require them to realign their agenda away from the things they were thinking of doing around strategy and competition, back into much more mundane things, making sure there are 20,000 mortgage and protection advisers still operating in this marketplace in 18 months’ time. “Only with that level of quality advice and introductions to great lenders will the customer be in the right place at the end of all of this to benefit from what will have been a very traumatic, turbulent period in all of our lives.” With the right support from the regulators, a focus on providing holistic financial advice to customers, and on adapting proactively as the full effects of the pandemic begin to emerge, the panellists all see a relatively bright future ahead. M I
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SPOTLIGHT
The state of play Loan Introducer speaks with Fiona Hoyle, head of consumer and mortgage finance at the Finance & Leasing Association, about how the association is working to protect the second charge market’s interests in challenging times
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he COVID-19 crisis has hit hard for almost all types of business, but it has proven especially impactful for non-bank lenders, which have struggled to access the necessary funding. Typically specialist, such lenders make up a significant part of the second charge mortgage market – often offering crucial lending solutions to borrowers who might struggle to find them elsewhere. The Finance & Leasing Association (FLA), which represents the interests of second charge lenders, has been working hard to fight their corner. Loan Introducer caught up with Fiona Hoyle, head of consumer and mortgage finance at the FLA, to discuss the state of the market and what it would like the government to do to help its members.
Fiona Hoyle
How serious is the funding crisis for non-bank lenders? Non-bank lenders typically rely on the capital markets and bank funding – both of which have become difficult to access since the onset of the crisis, so this has implications for future lending. What impact will it have on the second charge market if these lenders do not receive some form of funding? It really depends on the continued need for forbearance in this market once the lockdown ends – if that need is ongoing, then the funding available for new lending will be restricted.
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FLA update How has COVID-19 impacted the FLA’s operations? Although we are working remotely, the FLA is continuing to operate as normal by using various types of video conferencing to keep us in touch with members. We have moved our training online too, and it’s proving very popular – with more compact courses that fit better into the working day, and a limit on the number of attendees to make sure that the online format provides quality for those taking part. What have been some of your members’ main concerns? The main concerns are getting the Consumer Credit Act updated, so that it helps lenders provide quick and simple solutions for their customers. This will ensure that non-bank lenders have access to funding, so that they can continue to lend and contribute to the UK’s economic recovery, and the exit strategy to help customers resume normal payments when they’re in a position to do so. Are you worried about your membership numbers? Membership numbers have remained the same, and member engagement is particularly high.
What would you like the government to do? And are you hopeful it will happen? Opening the Term Funding Scheme to non-bank lenders would be transformative, as it would channel finance directly to where it is needed; for instance, second charge lenders, as well as small business funders, and those firms providing point of sale credit on high streets. These are all vital to economic recovery. We have spoken at length to HM Treasury, and these discussions are continuing. What kind of recovery do you think the second charge sector could see if the funding were made available? If funding is available then second charge lenders will be in a strong position to meet demand as consumer confidence recovers. Are you fearful of an increase in second charge repossessions? (The latest data shows the number of second charge mortgage repossessions in Q1 2020 was just 13, 45.8% lower than in Q1 2019) The second charge mortgage market has a very low repossessions rate – around 0.06% of outstanding agreements. In line with Financial Conduct Authority guidance, no repossessions have been taking place and lenders remain committed to helping their customers get through this tough period. M I www.mortgageintroducer.com
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SECOND OPINION
Is the market ready Natalie Thomas asks how businesses have prepared themselves for the
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he latest lending figures for the second charge market do not make for the most comforting reading. According to the Finance & Leasing Association (FLA), the COVID-19 crisis led to a fall of 14% in new second charge business in March, both in terms of value and volume, compared to March 2019. It is likely this trend will worsen still over the coming months. Overall however, the message from the market is that it is still raring to go.
So, Loan Introducer asks: “Are you receiving a lot of second charge mortgage enquiries?”
whose businesses have been able to continue trading throughout the challenging economic conditions; either because there is still strong demand for their goods and services, or becaue they have been able to quickly adapt their business model to continue generating good income levels. We also recently reintroduced our second charge buy-to-let (BTL) range, which means that there are now options again for consumer buy-to-let second charges, which were not available from any second charge provider at the outset of lockdown.
Jason Berry group sales director, Crystal Specialist Finance
Marie Grundy sales director, West One Loans Like most lenders, we reacted quickly to take into account the increased risk factors emerging as a result of the pandemic. West One Loans has continued lending throughout the crisis, albeit with an adjusted credit risk appetite, to reflect the current market conditions. Clearly the mortgage market has been operating in challenging times, but what is positive is that we have definitely seen a significant uplift in second charge enquiries in the last couple of weeks. There are a number of external factors influencing this, most notably the ability for physical valuations to take place again following the gradual easing of COVID-19 lockdown restrictions. This has given us the opportunity to increase the options for borrowers who need access to increased loan-to-values (LTVs) and loan amounts. Specifically, we are seeing increased interest from self-employed borrowers
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We are continuing to see a regular flow of secured loan enquiries. The majority of these enquiries are from customers who do not have a perfect credit history and would struggle to obtain any other form of funding. Debt consolidation and capital raising for business purposes are the main loan purposes – perhaps surprisingly, raising funds for a deposit to purchase another property is next. The biggest barrier to successful processing is the outdated ‘second charge consent’. This archaic requirement still relies on post and paper forms to be received from lenders and is frustratingly slow.
Buster Tolfree commercial director – mortgages, United Trust Bank Clearly it’s not business as usual at the moment, but we are in business. The second charge market has retracted by about 80% in pound-per-month terms; however, we
estimate our market share has increased significantly, which means we are actually quite busy. With everyone working remotely, we have managed to improve some processes. Some have stayed the same, and some are less elegant than they would be if we were all in the office together, but we’re working on that. On balance, we have plenty going on to keep us all occupied. We’ve even managed to push on with some projects that had been put on the back burner before the pandemic. The types of enquiries are largely consistent with pre-COVID-19 loan purposes, although the number of eligible customers is somewhat reduced, given our slightly revised criteria and the current economic climate.
Alistair Ewing owner, The Lending Channel Our volume of second charge mortgage enquiries has fallen off a cliff since lockdown, and some of the leads that are coming in are proving difficult to place. This is mainly attributable to clients not being suitable for lending due to such factors as being furloughed, on a mortgage payment holiday, or not working in a suitable employment sector.
Tim Wheeldon chief operating officer, Fluent Money Business volumes are, unsurprisingly, much lower than we usually experience, in the wake of COVID-19. We did have a flurry of enquiries initially, before the actual lockdown was imposed, and these provided us with us a relatively www.mortgageintroducer.com
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SECOND OPINION
to thrive? eventual rebound in enquiries, and if it has started already robust pipeline in the first few weeks once restrictions had been put in place. Accordingly, whilst secured lending has undoubtedly been negatively impacted, we have actually had some record sales in the first charge business in relation to mortgages. Intuitively, customers appear to be reviewing their finances, in order to tighten their belts and consolidate debt. However, and perhaps as a consequence of the fact that people are actually spending much more time in their homes than they are used to, we are seeing customer demand for lending for home improvements. As we are very much the middleman in all of this, we are affected by the circumstances relating to both our partners at the top of the sales funnel, and our lenders at the bottom, so to speak. Despite the overall reduction in new customers coming into the process, the biggest barriers to helping our customers have come from the back end of the process, with developments across our lender panel and their associated third parties. A couple of our lenders stopped lending to new customers altogether. Others introduced restrictions in relation to their lender policies, on criteria such as employees working in certain industry sectors, self-employed individuals and focusing on servicing existing customers only. The magnitude of the government’s Coronavirus Job Retention Scheme (CJRS), and the resulting community of furloughed workers, has posed another challenge for lenders, wherin affordability levels have diminished against reduced incomes based on previous lending decisions. Not only have the product offers that are available depleted, but offers in mid-pipeline have had to be withdrawn on the grounds of uncertainty and changes in eligibility status. Lockdown has meant that no physical valuations have been able to take place in www.mortgageintroducer.com
customer’s homes. This is another factor which has impacted on lending in relation to lower loan-to-values (LTVs), particularly on higher end properties. Overall, the COVID-19 pandemic has meant that many of the second charges which were once classified as straightforward have become a lot more complex on the grounds of customer affordability and properties’ prices. We believe that this will undoubtedly follow through into the mortgage arena, too, as the true impact of such a downturn in the economy starts to materialise. We are fortunate, in that we can offer outstanding equity release products to our customers where applicable.
Richard Barham second charge mortgage specialist, Brightstar Financial We are certainly seeing a number of enquiries, and there is ongoing demand from customers. The main areas of demand are for debt consolidation and home improvements, including extensions and the construction of outbuildings. A lot of the enquiries are at higher loan-tovalues (LTVs) and options here are limited. There are still lenders able to lend up to 100% LTV, but most are now capping at 75%. We have been able to arrange some internal inspections by surveyors, but in general valuations are currently done by automated valuation model (AVM). Some lenders have restrictions on the maximum LTV and loan sizes they allow using an AVM. Some lenders will insist on having a driveby valuation, and we have some cases on hold that require an internal inspection. Lenders are also taking more robust steps to assess affordability, particularly for the self-employed; the occupation
and sector that the client works in is an important consideration. Lenders will also look at whether a client has taken a payment holiday on their first charge mortgage, as this raises affordability concerns regarding a potential second charge.
Gavin Seaholme head of sales, Shawbrook Bank
The recent government announcements around easing lockdown, opening up the construction and property sector, and allowing some additional people to go back to work, will clearly help drive activity. However, challenges remain for second charge providers in terms of the first charge space being very favourable on rate, meaning that on this basis, remortgaging will perhaps be more appealing. There is also the issue of customers’ credit profiles and any impairment that may have occurred over the last few months, with banks and lenders – rightly – having to be more flexible in their approach to customers’ circumstances, ensuring they make the right risk-based lending decisions. That said, people are increasingly using second charge mortgages for debt consolidation, to reduce outgoings and rearrange their finances. We have also seen an upturn in home improvement applications, as customers seek to add value to their current residence rather than moving – due mainly to uncertainty around markets and employment. It may take some time to see things return to pre-COVID-19 levels, but with more technology and innovation, as well as lenders taking the time to provide education around the value of the second charge space, the market should start to rebuild fairly quickly. M I JUNE 2020 MORTGAGE INTRODUCER
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THE FUTURE OF SECOND CHARGE
All ahead full Natalie Thomas looks at how the COVID-19 crisis has made the second charge sector embrace technology, and how these operational changes will shape the future
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echnology has been fundamental to keeping the second charge market moving throughout the lockdown. Firms which were once tech-shy have had to turn their hands to concepts such as e-signatures, facial recognition, and home working – but what will happen once lockdown is lifted? Will firms want to go back to the old way of doing things, or is a new technical awakening on the horizon for the market? THE GREAT TECHNOLOGY DIVIDE When it comes to technology, there are already a great number of firms within the second charge sector which have been pushing to move further into the fintech arena. Either through habit or lack of demand, however, some of the newer initiatives have failed to get off the ground. “Some of the solutions available have been around for several years, with e-signatures being a great example of this,” says Marie Grundy, sales director at West One Loans. “It’s interesting that anecdotally there was a relatively low take-up by borrowers for this type of service previously, however this is the kind of tech solution that I am sure will become an essential feature of the market going forward.” During lockdown, West One Loans has also introduced a procedure to allow independent legal advice to take place by video conferencing, as well as utilising automated valuation models (AVMs) and drive-by valuations. Grundy believes the continued focus on technology will become a top priority for the vast majority of businesses post-COVID-19. Lockdown has, in many ways, brought to the forefront the divide between those firms that have led with technology, and those that haven’t. “Lenders [which] have embraced electronic ID and desktop valuations have, quite rightly, been well received by distributors [and] brokers, along with those accepting electronic signatures,” says Jason Berry, group sales director at Crystal Specialist Finance.
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“Moving forwards, these technology practices need to be adopted more widely in the marketplace, and there is still room for further innovation,” he continues. It is not just e-signatures which have proven useful, but facial recognition has also come into its own during lockdown. Tim Wheeldon, chief operating officer at Fluent Money, says: “As an established fintech business we are already pretty advanced in the technological aspects. We introduced our new [ID and verification] upgrade to the MyFluent App, allowing customers to have their identity verified using facial recognition. “This seems to be working well, although clients not having access to a printer is a challenge when trying to be fully online, and lenders aren’t as digitised as they could be.” Wheeldon added: “Paperless is definitely the way forward and supports our fintech ambitions. We have successfully adopted more digital technology for both customers and staff, such as electronic signatures, application pack fulfilment online and electronic payroll and staff management capabilities.” Paul McGerrigan, chief executive officer at Loan. co.uk, is another broker who would like to see the universal adoption of features such as e-signatures. He says: “Surely, in this modern age we can move away from the need for a pen and paper to seal a contract. Offers out in the post and posted back are far from frictionless and simple for borrowers.” McGerrigan would like to see the wider use of mobile apps to securely transfer information and speed up processing times. “Removing the need for the traditional postal system would shave weeks off arranging a loan or mortgage, and all the technology exists to do it,” he says. “People spend an average of three hours and 15 minutes a day on their mobile phones, according to RescueTime. They are used to it, so why not give them what they want.” United Trust Bank (UTB) is one lender which has embraced fintech solutions in the second charge space. Its Nivo App allows for a facial recognition ID check to be done remotely, as well as providing chatbots to complete security checks that were previously www.mortgageintroducer.com
LOAN INTRODUCER
THE FUTURE OF SECOND CHARGE telephone-based, says Buster Tolfree, commercial director – mortgages, at UTB He explains: “We have accelerated our plan to go entirely paperless. Aside from the commercial benefits of not printing and posting documents, it’s great for the environment. “We are also very close to launching three big new digital changes. Two that will make our introducer [and] customer communication even slicker, and one that will improve the speed at which we can make lending decisions…watch this space!” NEW WAY OF WORKING It is not just the application process which could change, but also the day-to-day working patterns of companies and their employees. “As a business, we were firmly located in one building in Horwich only a couple of months ago, with the majority of the full-time workforce on-site five days a week,” says Wheeldon. “Having introduced homeworking for our entire workforce as a necessity, we have realised that many of them can be just as productive wherever they are working from. “Of course this does not apply to everyone, but it certainly changes the future landscape for Fluent.” This means the business could potentially look outside of its usual recruitment catchment areas, and introduce more flexible working hours for its staff. Berry is of a similar mindset. He says: “We will undoubtedly keep many elements of the working from home experience. “The lockdown has accelerated the direction of travel we were already heading in, and a new postCOVID normal has undoubtedly been created. “It is great that effective online meeting software has been found which enables us to train and educate our supporters whilst being physically distant.” Indeed, video conferencing has been one of the great eye-openers for firms during the crisis. McGerrigan asks: “Why travel hundreds miles for meetings when three, four, five or more can collaborate on a video call? “Thousands of miles a week can be saved, as well as aching backs and a damaged ozone.” He adds: “Home working can actually work better for many people. It’s all about trust and reciprocity. “Employers must trust their employees to be responsible and accountable, and employees must be. “It’s not a solution that will work for everyone, but it certainly has to be considered in a modern workforce.” Brightstar Financial is another firm which feels its staff have been able to work from home as effectively as they would in the office. To address the challenges created by COVID-19, the firm set up a new phone system, which is able to record calls and direct these from its sales desks to employees’ mobile phones. www.mortgageintroducer.com
“Home working can actually work better for many people. It’s all about trust and reciprocity.” “This means we can continue to have a robust audit trail and any fact-finds that are carried out over the phone are saved onto our Easy Source system alongside documents,” says Richard Barham, second charge mortgage specialist at Brightstar Financial. “We can continue to serve the growing demand for second charge mortgage enquiries with confidence,” he adds. A HAPPY MEDIUM The lockdown may have shown technology at its best, but it has also thrown its limitations into sharper focus. Alistair Ewing, managing director of The Lending Channel, explains: “As a team, we are working fairly efficiently from home, but you can’t really beat the vibe of a busy office for creating a great team atmosphere. “And while we would all prefer to be back in the office, I anticipate that Zoom-type meetings will become more commonplace within our business and the sector as a whole.” Wheeldon describes technology as an important resource during this crisis, but adds: “The human factor has also played a huge part. “The daily meeting of minds from the outset to agree the strategy and contingency planning that was ongoing, and still is going thereafter, was and remains equally as important – from the strength of the board-level decision-makers, to the staff who worked relentlessly and around the clock to make it happen.” Beyond just being able to physically obtain the correct IT kit for his team, Wheeldon notes that the firm was fortunate to be able to afford it. While working from home can in some ways be cheaper than renting out expensive office space, the latest technology can come at a cost – especially for smaller firms which might not have the budget. The cost of fintech could perhaps explain its relatively low take-up among some firms. Although it is not the magic answer for everything, tech has helped the sector enormously over the past few months, and no doubt opened the eyes of many firms – and borrowers – who were previously reluctant to embrace it. While the jury might still be out on elements such as working from home, there is a strong probability that solutions such as e-signatures and facial recognition software will become more prevalent in the sector after lockdown. Many have realised the potential and the benefits of working alongside fintech, rather than against it. M I JUNE 2020 MORTGAGE INTRODUCER
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HOUSING MARKET
Reopening of the housing market...and? Nicky Richmond managing partner, Brecher
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rom 13 May, it became possible once again to buy, rent and sell properties, as long as it was done in a COVIDcompliant way. Easier said than done, but possible. Agents lined up to tell us that all the pent-up demand meant that there would be an explosion of purchases, in one case going so far as to say it would be “releasing the anxieties caused by the lockdown.” Agents bigging up the market? You would expect nothing less. But let’s look at whether that is true and what the lenders are seeing. WHAT’S IT WORTH?
One of the first COVID-19 enquiries we received asked us to explain the impact of the inclusion of the ‘material valuation uncertainty’ clause. The Royal Institute of Chartered Surveyors (RICS) suggests the following response: “The term is not meant to suggest that the valuation cannot be relied upon; rather, it is used in order to be clear and transparent with all parties, in a professional manner that – in the current extraordinary circumstances – less certainty can be attached to the valuation than would otherwise be the case. Indeed, with regard to the process itself, professional valuers will almost certainly have undertaken far more due diligence than normal, in order to arrive at their estimate of value.” What does that actually mean? If they get it wrong, because the market tanks or they can’t get comparable, you may not be able to sue them – lessons learned from 2008.
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In practice, many bridgers have switched to the automated valuation model (AVM) to carry on lending. IF WE BUILD IT, THEY WILL COME
Across the board, lenders were from the start seeing construction workers trickle back to sites, especially the smaller ones, where it was possible to stick to some sort of social distancing. On larger sites, that was and remains more difficult. There have been and will continue to be construction delays. This will push out the timetables for delivery.
“In cases where substantial deposits are given, defaults will be less likely, but where there is the combination of a smaller deposit and a falling market, it’s possible that we will see more. Longstop dates are being pored over by lenders” To address this, some lenders have extended interest payment periods, and some have even given interest holidays. Many schemes are now unviable unless there is a shift in sales prices. Anyone sitting higher up the stack than the senior lender may be doing so rather uncomfortably. On new loans, many lenders have reduced their loan-to-values (LTVs) by 10%. Many are looking at ways to bridge the gap to make schemes viable, and the Coronovirus Business Interuption Loan Scheme (CBILS) seems to be the flavour of the month. The British Business Bank lists more than 40 accredited lenders, including Close Brothers, Oaknorth and Secure
Trust. Expect more of this, as lenders try to come up with creative ways to help their borrowers. This may be what is known as kicking the can down the road, but there is no rush to enforcement in many cases. The optics aren’t good, and better to keep the borrower in the game. A SHIFT IN SALES PRICES?
No one but the most optimistic is predicting massive hikes in sales prices. Indeed, most lenders believe Rishi Sunak when he warns of a prolonged and deep recession. It’s all very well dreaming of an escape to the country, but many firsttime buyers will simply be focusing on keeping their jobs over the span of the next year or two. This uncertainty might presage a shift to long-term renting, but coliving in the age of COVID-19 is also looking less like a good idea. Anyone developing sites with communal areas might be looking at their plans. Most agents, speaking off the record, are expecting any sales that go through to take a hit of between 5% and 10% on the asking price, in some cases already COVID-adjusted. OFFSHORE AND OFF PLAN SALES
It will be interesting to see how many offshore purchasers default on their purchases, and what happens to the new sales. Defaults are not happening, according to the lenders we know. Sales are taking longer, but generally they are still taking place. In cases where substantial deposits are given, defaults will be less likely, but where there is the combination of a smaller deposit and a falling market, it’s possible that we will see more. Long-stop dates are being pored over by lenders. THEY THINK IT’S ALL OVER
Whilst one appreciates optimism wherever one can find it these days, the view from the lending platform is realistic, rather than optimistic. The opening up of the housing market is helpful, but certainly not the life-changing event that some agents might have you believe. M I www.mortgageintroducer.com
SPECIALIST FINANCE INTRODUCER INTERVIEW
DEVELOPMENT FINANCE
The new normal in development Sam Howard managing director, Magnet Capital
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t felt like the chains had been unshackled as I stepped out of my car, in bright sunshine, at one of Magnet Capital’s development sites last Monday morning. For the first time in over nine weeks I was able to do what I enjoy most: visit our projects, see how they have progressed, and chat with our developers and their team. Except it wasn’t normal, I was sweltering in a mask and gloves, despite being on an open-air site, with the two bungalows at wall plate stage. I took my position a good two metres away from the developer, whilst the rest of his team were mostly at home, except for two labourers distancing in a corner of the site. Despite this, the client was delighted to be back on site, having lost a good six weeks due to lockdown, closed suppliers and a scarcity of labourers. Thankfully, roof trusses and windows were soon to be delivered, so that the site could continue with no delays. Roof tiles from Spain were causing an issue, but he had a
Delays and rising costs are a reality for all developers
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workaround, and frankly he is one of the lucky ones. Across our extensive range of development sites at Magnet Capital, we have heard of difficulties for developers in getting bricks, block and beams, and specifically those building materials which require bespoke factory settings, such as windows and roof trusses. Factories are starting to open up, but there is a backlog of orders. To comply with social distancing, developers are faced with having only a skeleton crew on-site, which will be magnified when the properties are watertight and work starts on internals. Hand sanitiser, cleaning of surfaces, and face masks will all be necessary. Delays and rising costs are a reality for all our developers. As a development finance lender, we have to be realistic that our clients’ projects will overrun their loan period, and we need to help them either to extend their loans or source developer exit products. The new normal is also opaque as to what will happen to the property market in terms of house prices and the mechanics of selling new-builds. There will undoubtedly be farreaching economic ramifications; at the moment, though, there is plenty of pent-up demand.
The government’s lockdown measures resulted in an estimated £82bn of house purchases put on hold. Some early indications suggest that the market is springing back into life; Halifax is reporting mortgage applications spiking by 36% in the past week, with Rightmove seeing visits from prospective buyers increase by 4% on the same day a year earlier. We are all going to be spending more time in our homes, and spacious properties with gardens and nice views should be in demand, whereas flats in high rise blocks, requiring lifts and in urban areas with little outdoor space, might struggle. This could be accentuated by people increasingly working from home, with less need to be in urban areas, close to their place of work. The commute will become less of a burden on the psyche and the pocket, if people are working from home a couple of days a week, meaning that more living space, further out of the city centre, becomes much more desirable. Agents will need to find ways to cleverly market their properties, offering virtual imaging cameras to create accurate floor plans and 3D simulations of properties, or filming short video tours inside. Potentially, the new-build market will outperform the second-hand market, as the risks are lower visiting a vacant rather than occupied dwelling. The mechanics of buying and selling are further complicated by the difficulty in the current climate of getting valuations, surveys, searches, and dealing with the Land Registry. Sellers need to get all their paperwork ready and buyers need to ensure that they have a decent solicitor that is not stymied by working from home, and surveyors that are willing and able to attend the property. Last week felt like the mist was lifting and normality returning, However, all we can do is take each day as it comes. Looking too far into the future of the property market is unwise in the best of times, and especially now. M I JUNE 2020 MORTGAGE INTRODUCER
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NETWORKS
Resilience shining through Shaun Almond managing director, HL Partnership
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s most people who know me will say, I am glass half full person. Current issues looked daunting, but my natural optimism has not taken long to reassert itself. You can only work with what you can control. As advisers, we can control how we recover our businesses and improve our strategies in order to assist us to remain in business. I am delighted that so many firms share the same philosophy in the way they have adapted their working practices, and in their focus on offering the services which are most beneficial to customers at this time.
At HLP, technology adoption has been a core strategic goal for a number of years. The delivery of a seamless process – from initial data capture at a customer relationship management (CRM) level, either face-to-face, via telephone or online, to mortgage or protection sourcing, processing and completion followed by regular reviews – is now almost complete, with some of the most advanced technology now available to our members. At the lender level, the speed with which mortgage products are reappearing has surprised us all. Lenders and funders have worked hard to overcome issues around physical valuations with advancements in the use of automated valuation models (AVMs), but with lockdown easing and valuers able to make house calls, supply is increasing and I have no doubt that demand will also rise exponentially.
However, there have been wider issues for all of us in the intermediary market. COVID-19 has forced us to re-evaluate the balance between new business acquisition and the value of our existing client banks. In a normal market, it is still too easy to forget to maintain a relationship with customers and the potential new business they represent in respect of protection solutions and other needs. In our sector, this crisis has shown that advisers are in the best position to support those struggling with payment options or needing to refinance. There has never been a better time to reinforce customer relationships. It is becoming clear to anyone looking to run a successful business that the world is not simply going to go back to normal. Therefore, it is encouraging to see so many advisers embracing the need for change. M I
BRIDGING
When the holiday is over Brian Rubins executive chairman, Alternative Bridging
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uspending interest payments for three months is a deferral, not a holiday, and unpaid interest must be settled. New loans to replace expired ones, or facilities where debt service cover or loan-to-value (LTV) covenants have been breached, will rapidly become the order of the day. Similarly, where ongoing funding is no longer viable for the current lender, refinancing will be essential in order to see development projects completed. Problems on the high street are well publicised, and when Q2 rents are due, the situation will worsen. Retail, office
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and industrial tenants will demand indulgence in greater numbers, and landlords will seek further deferral of interest, which may not be forthcoming. Lenders cannot ignore mounting defaults; regulators will not let them. Extend and pretend was yesterday. Today, lenders must account for anticipated problems. Their solution will be to pick low-hanging fruit, applying pressure to those customers who can repay, be it by sale or refinance. The route to repayment for the lender will be the appointment of a receiver, which can be effected in a matter of days. Although the lockdown of the judicial system will cause proceedings to be slower, they will be no less costly, and will grind on with the same inevitable result: the destruction of the borrower’s equity, which must be avoided at all costs.
Borrowers do not want receivers to sell their properties! The receiver is the agent of the borrower, but the strings are pulled by the lender. The obvious choice is for a borrower to refinance or sell under their own instruction. Negotiating refinance under current circumstances takes time, and sales do not happen overnight, so the sooner a borrower begins the process, the better. Where lenders see positive action being taken, most will act reasonably. If the process cannot be completed quickly, bridging finance is an alternative to incurring a delay. Promises of ultra-low interest rates and completion within days are the snake oil of some brokers and lenders. Borrowers and brokers should only deal with trusted partners that will deliver what they promise. It is time to start the process now, while decision-making is in the borrower’s hands. M I www.mortgageintroducer.com
SPECIALIST FINANCE INTRODUCER INTERVIEW
SPECIALIST LENDING
The need for a level playing field Laurence Morey CEO, Pepper Money UK
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ecent months have certainly been challenging for the mortgage market, but they have also provided an opportunity to demonstrate how quickly we can adapt and respond to the changing needs of our customers. On 17 March, Rishi Sunak announced a series of initiatives, including payment holidays and a moratorium on repossessions. By the end of April, one in seven mortgages were subject to payment holidays. Achieving this in just a few weeks required a monumental effort from lenders, and has been a significant financial drain for all, given the large operational cost of implementing the scheme and the subsequent loss of monthly cash income. Whereas banks have been able to access additional government funding to support this activity, non-bank lenders have not. This inequality has been recognised by a coalition of trade bodies, including the Finance & Leasing Association (FLA), UK Finance and the Intermediary Mortgage Lenders Association (IMLA). They have proposed a trio of schemes to support those lenders that have been so responsive in offering payment holidays and other forbearance measures. At Pepper Money, we wholeheartedly support this approach. We have written to the Chancellor, Secretary of State for Business and a number of other high-profile MPs, requesting an urgent escalation of the discussions between the Bank of England, Prudential Regulation Authority (PRA), Financial Conduct Authority (FCA) and non-bank mortgage lenders, to ensure we are supported in playing a key role in the UK economic recovery. www.mortgageintroducer.com
As you know from your clients, mortgage customers have a diverse range of needs and circumstances that are not always well served by the high street retail banks. Non-bank lenders therefore have a critical role to play in the country’s recovery, as they provide a vital service to the self-employed, as well as borrowers rejected by the banks due to their credit history or changes in their financial circumstances. As we emerge from this pandemic, it is likely that a growing section of the population will fall into this category, and they will require support. REDUCED CONFIDENCE
However, at the same time, the impact of such a widespread initiative of customer forbearance and potential future arrears will lead to reduced confidence in the debt capital markets. Central government support is needed to bring stability and certainty to those markets to ensure they function appropriately. If non-bank lenders continue to be excluded from this support, it will impair their ability to lend money to new customers.
Retail banks are unlikely to step into these segments, because of the handson nature of the underwriting and sector expertise that is required. So, these customers will go unserved. The consequence of this will be a contraction in the overall mortgage market, a reduced number of customers being able to access products that meet their needs, and a growth in the number of mortgage prisoners. Ongoing lending boosts the economy, protects jobs, and delivers competitive mortgage lending across the housing market. Non-bank lending plays a vital role in this. As a sector, we have demonstrated how responsive we are in meeting the needs of our customers, and we have an appetite to meet the needs of even more customers in the future. In order to meet our true potential, however, non-bank lenders need to be on a fair and level playing field with the banking sector. We can all help to create one, if we make sure to play our part in raising awareness about the many benefits of non-bank lending. M I
Whereas banks have been able to access additional government funding, non-bank lenders have not
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FIBA
Can we adapt to a new way of meeting? Adam Tyler executive chairman, FIBA
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ust a few short months ago, when asked to view or take part in a webinar, my reaction would have been that we are a people-focused business and I like to meet face-to-face. Hence why I used to spend two or three days every week travelling, arranging up to six meetings a day, all to discuss the Financial Intermediary & Broker Association (FIBA), the market, and how working together is benefitting the industry. Last Friday, however, as part of a series of four webinars run by FIBA in conjunction with Precise Mortgages, we had nearly 300 brokers sign up. The session was titled ‘Taxation in the Buyto-Let Industry’.
already? Taking this to the next level, we already stage virtual events, such as full conferences with exhibitors. During the breaks between speakers, attendees can sample a breakout event or meet a lender at a virtual stand to discuss a particular deal one-to-one, or learn what that lender can offer clients. All without leaving the office or, as it is at the moment, the house! ACTION
Whilst there would be time to meet lenders, peers and of course customers, at this time of social distancing it would
“There needs to be a real debate to consider and agree on how we work and continue to operate in an environment which is unlikely to be the same again”
be very easy to contemplate this virtual approach as a workable future, but it cannot be just that. Virtual meetings and gatherings could very well be the answer, but there needs to be a real debate to consider and agree on how we can all work and continue to operate in an environment which is unlikely to be the same again, certainly within the foreseeable future. OPPORTUNITY
Embracing the opportunities that technology now offers will certainly be more efficient. Hopefully, we can give ourselves that extra time we have been craving for years, and use it to increase the number of opportunities we are able to consider every week. This is no longer just a potential new way to work, it is available now and we all know it, not least from the number of Zoom or Teams calls we have been on in the last few months. At FIBA, we are looking at plans for our own virtual event, and have already staged some as part of the SimplyBiz Group. The examples above are very real for those who have attended, and have worked tremendously well. M I
ENGAGEMENT
The subject matter covered how a broker might help landlords navigate through the various changes in legislation, how these changes have affected the market, and what landlords need to know to make their buy-to-let (BTL) business a success. It was a fantastic turnout. Incredible, given that the timing was at 2pm on a Friday! It was also not a one-off, with other webinars in the same series drawing in more than 200 registrations each, even on rhe Friday before a Bank Holiday weekend. The level of engagement for these events has shown that, while Friday afternoons are traditionally a complete no-go for any participatory event, this kind of webinar, delivered so as to give people an easy way to take part, as well as the right type of topic delivered by a capable speaker, does attract support. Does all this mean that we are ready to embrace a technology-linked future
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The importance of lender panel reviews I
have promised myself to stop talking about times being ‘unprecedented’ and other equally stale opening lines about changed circumstances. However, there has never been a better time to do some spring cleaning, and one of the most important items is to review your lender panel. Lenders have withdrawn products or cut back their offerings, and while herculean efforts have been made to maintain service levels, some disruption has been evident as staff members have moved to working from home. The additional issue caused by the lockdown came in the shape of valuers not qualifying as key workers, thereby dictating
which lenders were still able to go to offer. While automated valiaton models (AVMs) and desktop valuations have become more greatly used, for many, particularly those whose funders insist on a physical option, the situation has created a bubble of applications awaiting valuation. As I write, some of the lockdown provisions are being eased, and valuers are going back to work. However, the fact remains that some lenders are better placed than others to provide clients with all the services they currently require. At FIBA, we are in constant contact with lender panel members to ensure that we are aware of how they are coping, and I would recommend that you do the same.
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From the frontline
Iquam nocum amqua pripimpl. Deconsit; ia moveheb atius, escritam nonsu conderf ercesenis vit, qui pro vividem ovehenatam a publii The stories impacting the industry during the coronavirus crisis
Alternative Bridging donates meals to NHS
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lternative Bridging Corporation has committed to donate one meal to Compassion London for each loan enquiry it receives during the COVID-19 pandemic. Compassion London was founded by Leon Aarts in response to the COVID-19 lockdown. The charity provides meals to NHS staff and other key workers, individuals and families in need, and the most vulnerable in society. Compassion London is run by a team of volunteer chefs, delivery drivers and support staff working seven days a week. It relies on donations from a wide range of partners. James Bloom, divisional director of Alternative Bridging, said: “In the past 30 years, we have experienced many crises and our primary focus has been to ensure our business continues to support our partners during such times. However, we must also have at the forefront of our minds those who are risking their lives to help those who are vulnerable and in need in our community. “We are pleased to be able to provide practical support and, given the high level of enquiries we are receiving, we look forward to providing many meals for front line workers and those who need help. Compassion London is doing excellent work and we are very pleased to be able to assist them.”
Scottish Building Society launches support package
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cottish Building Society has launched a series of measures to support homeowners in financial difficulty during the cornavirus crisis. This includes a ban on repossessions until June 2021 – which goes a lot further than the FCA’s recommendation of October 31. As well as banning repossessions, the society is extending the current three-month mortgage break to six months to support hardest-hit customers. They are also encouraging landlords to help those struggling to pay rent, by offering mortgage holidays if they pass on the benefit to tenants.
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Nationwide to provides extra support to Shelter
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hrough its longstanding partnership with Shelter, Nationwide will fund more advisers for the charity’s Helpline and HelplinePlus services, which provide specialist advice to those with housing, debt and welfare issues. Nationwide will also support the introduction of new Shelter community engagement officers, who will provide community outreach for people that struggle to access support. The charity will this year also receive a goodwill gesture as the Society’s chairman and non-executive directors voted to donate 20% of their net fees to Shelter from June to December. Polly Neate, chief executive of Shelter, said: “Nationwide has been supporting Shelter in its fight against bad housing and homelessness for nearly 20 years now, and we are hugely grateful for their generous donation today, which will help to keep our essential frontline services going when they are needed most.” www.mortgageintroducer.com
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