Cover: Northern Light

NORTHERN

LIGHT

John Truswell

In a career that spans nearly 40 years, the city of Newcastle has played a central role in John Truswell’s life, his career and his successes.

Having graduated from Northumbria University in 1984 with a degree in Geography, Truswell began his career working for the Nationwide Building Society in Newcastle, and then in other branches in the North East on a graduate scheme.

After that, he joined Bradford & Bingley in the Midlands in 1989, before going on to help set up a mortgage brokerage.

In 1996, Truswell returned to Newcastle and joined Northern Rock as part of its intermediary sales management team.

Following the 2008 crash, he became the head of national accounts at Virgin Money, before moving on to Capital Home Loans in 2016, and then to Together one year later, as its head of national accounts.

Last year, he joined Newcastle Building Society as head of intermediary mortgages.

As someone who has seen it all, is the industry in better shape now than when you first joined it?

It’s fair to say I have seen the mortgage market change beyond recognition, but most of those changes have been necessary and welcome.

The booms and busts of the housing market in the 1990s and 2008, and the reductions now in 2020, underline why developing a responsible and resilient lending industry has been so important.

No single model is right, but all have to withstand and embrace hugely varied stresses and pressures, whether from global markets, policymakers, technology or society.

Our role and responsibility is to help people satisfy a very human need: to have somewhere safe to live.

Brokers play a significant part in delivering that experience to borrowers. They are an extension of our business and have evolved immeasurably as an industry too.

Mortgage Introducer catches up with John Truswell who, in September 2019, returned to the city of Newcastle to head up Newcastle Building Society’s intermediary lending team

I am always impressed with how well brokers and the market generally adapt to the challenges they face.

What attracted you to Newcastle Building Society, other than a return to a city that has been so important to you?

What really impressed me from the outset, and what continues to do so, is that the society’s approach is totally customer-centric.

I’ve always thought you should judge companies by what they do as much as what they say.

We rightly have a reputation in the broker market for excellent service; that includes offering manual underwriting on all our cases and allowing brokers to talk directly to our underwriters.

We have always tried to offer products that help real people. But the society’s desire to put customers first goes beyond what you might call the hygiene factors of value and service.

Newcastle Building Society has an incredibly strong sense of community, and it genuinely ‘walks the talk’ of being a regional force for good.

We are opening branches in our heartland in towns and areas where many others are pulling out – whether they be innovative uses of existing spaces, such as town libraries, or our own new premises.

Authenticity is incredibly important in everything we do, and it’s really uplifting to work for an organisation that understands its responsibilities to both its locality and the broader community.

The recent partnering with a local business to donate hand sanitizer to local communities tells you a lot about how important it is for the society to not only do the right thing, but actively commit to making a difference.

Our Community Fund is a great example; it’s an initiative that makes grants available to charities and groups local to our branches that can make a real difference to the areas in which we’re based.

Alongside this regional commitment is an incredibly powerful understanding that Newcastle Building Society is part of a national financial services landscape. The society is totally committed to the bigger national picture through its mortgage lending.

Investments in the team, products and service all underline this commitment, and the growth in mortgage lending over the last couple of years, and speak volumes about that commitment to getting it right.

Of course nothing is perfect, but intermediary lending is at the heart of that growth and how we plan to move the society forward.

By understanding our customers, we are able to try at all times to have a flexible, imaginative and pragmatic approach to borrowers’ circumstances.

We have products for many markets over and above what you might call standard residential, including Help to Buy for purchase and remortgage, high loanto-value (LTV) lending, large loans, joint mortgage sole proprietor (JMSP), custom and self-build. (This last product is close to Truswell’s heart. He has lived by the coast in South West Wales with his wife since 1999, when they bought and renovated the old cottage they now live in.)

It underlines my point that borrowers are never really the same, and brokers need broad product suites to help all their clients.

The brokers that know us understand this; our challenge is making sure many more know what we can do to help them and their clients.

What can the intermediary market expect in the future from Newcastle Building Society?

I believe our current proposition is compelling, albeit not as widely known as I would like.

Our broker offer is nuanced, so isn’t always easy to get across, and that is a challenge for us – not only for now, but also whilst we improve and evolve it.

We really are a well-kept secret – a hidden gem that many more brokers and their clients should appreciate! But we know that markets do not stand still, and that what we have will only take us so far.

We have plans to grow our current mortgage portfolio by developing new products for other markets. All our new products have to come with unique selling points, because we don’t have the scale to compete for any real length of time in vanilla markets with high street providers.

Brokers should expect us to keep growing the current product areas we have, as well as adding others in the coming months. We will also maintain our reputation for helpfulness and transparency through service improvements that make a real difference to brokers and their clients.

We will continue to grow our business development manager (BDM) team, which has already gone from two to six this last year, and have employed a national accounts manager to make sure everyone in the →

intermediary market, no matter what size of firm, understands the important nuances of our proposition.

As our society evolves post the COVID-19 outbreak, brokers and their clients will need products and services that address the real world – not the old one where there were no such things as mortgage payment holidays, or periods of furlough and lower earnings.

But these products will not often sell themselves on rate-driven sourcing systems and aggregators. This is why we need ‘boots on the ground’, both metaphorically and literally, to ensure that someone is talking to brokers about the value we can add. Everything we do needs to underline the point that we are serious about intermediary lending.

Newcastle Building Society has always sought to help real people with real finances.

That might mean they run their own business, or that they want to get on the housing ladder later in life. It could mean that they need a helping hand from the government’s Help to Buy scheme, or that they’re buying in a new development where homes are still being built. It could mean they’re newly self-employed and have just set up on their own.

How do you expect to see the consequences of the lockdown become apparent in the intermediary mortgage market?

The challenges we face as we emerge from this period will mean adopting a more innovative and flexible approach to product development and lending decisions. This will be essential to helping people stay in and acquire their own homes.

But even during this period it is vitally important that lenders provide support to brokers and their clients.

Although the current crisis has largely closed the sale and repurchase market for now, interest in remortgaging continues to be largely unaffected, as borrowers search for competitive, cheaper deals on their existing mortgage and are taking advantage of historic low rates.

Looking ahead, it is not unreasonable to assume that a flexible and nuanced approach to underwriting is going to be very important, as traditional approaches will not accommodate mortgage payment holidays, brief periods of unemployment, periods of reduced earnings, intermittent self-employment or changes in people’s employment status.

The lack of liquidity available to some centralised lenders, many of which have already ceased lending, means that retail-funded businesses like ours should sensibly play a part in supporting the property market and the brokers, borrowers and aspiring homeowners within it.

We’ve already seen our share of the buy-to-let (BTL) mortgage market grow as a result of many wholesale funded lenders withdrawing from the current market, but I think it’s incredibly important to support homeowners. We should not, as an industry, create another generation of mortgage prisoners who cannot be refinanced because we steadfastly refused to adapt to the ramifications of the outbreak.

Mortgage payment holidays, periods of furlough, and lower earnings, to name a few, will all demand more nuanced approaches to product design, criteria and underwriting going forward.

Getting a new-build off the ground

When Daniel’s client approached him, a 57 year-old recently divorced woman who had just returned to the UK after a long period living abroad, he recognised that her case would need flexibility and understanding beyond that offered by the usual Help to Buy new-build lenders: „ She needed to purchase an ‘off-plan’, new-build, semi-detached home in a brand new development in Bradford; „ She had a lack of credit history; „ She had only one year’s worth of accounts for her current business; „ She required a term of 17 years, taking her age to 74 by the time the mortgage would be redeemed.

Many lenders offer new-build solutions, but Daniel’s client had a suite of issues that had resulted in her being declined by traditional large players.

Newcastle Building Society prides its intermediary proposition on its manual underwriting and common sense approach to difficult situations. A lead underwriter for the society delivered the original decision in principle.

Upon receiving the application, it was clear that the client, a UK citizen, had been continually successful over the last decade in her field of work abroad, and that there was nothing to suggest she would be anything else here in the UK given her accounts, client base and line of work.

Within 10 years of the start date, the society was comfortable that the repayment mortgage balance would be reduced enough to be easily covered by her current state and public sector pension provision.

Her company net profits showed she had enough reliable business opportunities as a sole trader to continue supporting any obligations she had to the society.

The earnings and her income, taken alongside various savings, meant that with a clean property valuation the society was pleased to offer one of its self-employed Help to Buy products.

Newcastle Building Society was, therefore, able to offer a product specifically developed for self-employed individuals.

The final offer meant Daniel’s client could afford her three-bedroom home in a new Bradford development by taking a mortgage for £68,000, making full use of the Help to Buy scheme on the purchase price of £170,000.

The application was submitted in late July and an offer arrived 13 working days later. Daniel’s client expects to move into her new home in October.

Walking the talk of 95% LTV lending

In January of this year, a 39 year-old recently divorced man was introduced to Newcastle Building Society broker Clare by a local estate agent: „ He was renting in North London but, as a first time buyer, had no equity; „ He hoped to move out of London to a three-bedroom house in Buckinghamshire; „ He had an income of approximately £50,000 per year; „ His rent of more than £1,000 per month meant he had had to spend the last five years saving for a deposit.

While a large number of lenders claim to offer 95% loan-to-value (LTV) lending, many in reality do not have a large appetite for it.

Income multiples can therefore vary greatly as LTVs increase.

However, Newcastle Building Society assesses all borrowers’ affordability the same way, and as a result is able to do more to help in this market. The society contacted the broker as soon as possible to go through the case.

We conducted the initial assessment on 10 January and were able to get the offer out on 14 January.

Our standard criteria meant that, even though the client was only four months into the probationary period at a new job, Newcastle Building Society was able to take his previous experience in that industry into account, which was more than 12 months.

The society was happy to lend at 95% LTV, and to do so over a period of 30 years.

The client’s state pension and current pension contributions showed that over this long term he had the funds to continue to pay the minimal balance at the end of the mortgage.

Because of our affordability assessment model, Newcastle Building Society was able to offer an additional £13,000 to the client than the next closest lender.

This was, in real terms, the difference between getting the new home or continuing to live in North London paying a higher rent.

The valuation was returned, and the offer issued within seven working days. The client exchanged in late January with a target completion date of mid-February.

Newcastle Building Society was able to offer a 2-year fixed rate product, with no reservation or arrangement fee.

These are important features for cashstrapped buyers.

In addition, the client received £500 cashback to help with legal fees.

The result is that, instead of paying over £1,000 per month for rented accommodation, the client will shortly be a new homeowner with a repayment mortgage of £912 per month.

It’s likely the high street will not cater for these markets, but these are the cases where brokers will really add value by understanding which lenders can and will support them.

You’ve spoken about the role of lenders postlockdown, but what should intermediaries be thinking about for a future mortgage market?

At the moment, all brokers should be selling protection and insurances to clients, and looking to maintain that activity going forward, as events like these may not be one-offs.

Equally, many current customers will need remortgage or product transfer advice. Product transfers might not always represent the best solution for a client.

As we emerge, brokers will need more innovative product solutions and thinking from lenders to accommodate borrowers who need to remortgage but find that current products do not cater for the disruption to their finances caused by the crisis.

They should not be shy of talking to lenders to get the support or find it from societies like us.

Brokers will also face their own challenges as they deal with clients in a world where face-to-face meetings may well become more rare.

Current clients will be incredibly important in the nearterm, as those relationships that have been established face-to-face will be critical in getting through this period of uncertainty.

Looking forward, though, methods of winning new clients will need to change, as I don’t think a wholesale return to the old ways is likely.

More likely, this lockdown will encourage more borrowers to go online and do the initial research themselves. So, getting those face-to-face visits and explaining the value of the proposition will be more important than ever.

Given the increasingly fragmented nature of people’s personal finances and circumstances, while technology may change the way we access advice, it will not be able to fully replace it.

Only human expertise and experience can underpin the judgements we make and elicit the sort of insight that can only be gained from hearing someone’s tone of voice and asking the right comprehensive questions.

It’s thanks to our brokers that we can understand what customers want and need from us. It’s not the cheapest rate available, the size of any cashback or free legal fees; it’s that healthy dose of practicality when it comes to finding a loan that suits them and their financial cirumstances.

Understanding our proposition, where it fits and how it evolves, is crucial if we are to remain relevant to our brokers and take advantage of lending opportunities as they come.

I have worked in banks, centralised lenders, regulated and unregulated businesses, but I cannot remember a more challenging time, nor one which presents so many possibilities.

It’s important we do not get trapped in old ways of thinking and behaving, and I hope that we can shine a light on what is possible in the UK mortgage market.

A little imagination and willingness to listen will show how we can help brokers and their clients, both now and in the future. M I