Mortgage Introducer November 2021 by mortgageintroducer

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

November 2021

At Brightstar, we help brokers grow their business by providing the knowledge and resources needed to diversify into new lending areas across the specialist lending spectrum. In a market that’s more complex than ever, it’s difficult to be both up-todate and proficient on every type of lending — that’s where we come in. Each lending area has an award-winning, dedicated team each with focused expertise. Partnering with over 150 lenders, we can offer a range of exclusive products, enhanced SLAs and onsite underwriters. For the last ten years our purpose has been to support every broker and IFA so that they never have to turn a client away, and we look forward to providing this service for many more years to come.

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A few highlights from our first 10 years... Since our launch in 2011, there have been a number of moments we’ve been particularly proud of. From what we’ve achieved in our industry as a company, to what our employees have individually accomplished in their careers with us — it’s these moments that make the hard work worthwhile. In June 2013 we received our first ever award at the B&C Awards and have since won over 100 at many different industry awards ceremonies. 2014 was the year that we started our charity fundraising efforts, raising over £60,000 for The Sepsis Trust. Since then, we have raised funds for many different charities to help support their important work. In 2015 we achieved £1 billion worth of lending after just four years, having managed half a billion just 15 months before in 2014. Throughout this exciting time of significant milestones we were able to greatly increase staff numbers, launch new divisions and become regulated in October 2015. As well as growing Brightstar Financial over the last ten years, as the Brightstar Group we have launched more companies with a similar goal of breaking down the complexities of specialist property finance. Launched in November 2015, Sirius Property Finance has gone from strength to strength as an award-winning team that focuses on financing for high net worth residential and commercial real estate transactions. We were extremely proud to achieve Investor in People Gold status in 2016, then the title of Global Investors in People Gold Employer of the Year in 2017. Working in the Investor in People way, we’re fully committed to upholding this incredibly high standard for people management. The standard defines what it takes to lead, support and manage people for sustained success and is split into a huge range of performance indicators across numerous skill areas. 2016 was an exciting year, as we also became a signatory for the HM Treasury led Women in Finance Charter. This is a pledge for gender balance across financial services and since becoming a signatory we’ve seen a vigorous, full team commitment to equal access to opportunity, people development, progression and success for everyone in the business, regardless of gender. In 2017 we relaunched Private Label, a mortgage brand originally launched in the 1990s. Following extensive research with intermediaries, we evolved the brand to provide brokers with bespoke and exclusive underwriting on their high value cases, with access to a dedicated service, exclusive products, specialist lenders and private banks. July 2019 saw us reach 1000 Trust Pilot reviews and we’re extremely proud to have now reached almost 2,000 reviews and currently hold a 4.9 ‘Excellent’ TrustScore. In 2020 we were delighted to be named as the number one Best Small Company to Work For in the UK by the Sunday Times for a second consecutive year. In addition we’re extremely proud to have secured the highest ever score in the history of the competition for people engagement and to be the first company from any industry to top the list for two years in a row. We also scooped the Best Innovation Award for our outstanding Brightstar Partners initiative. Creating a positive work environment for our employees is hugely important to us and receiving a Three Star Best Companies accreditation; the highest quality mark possible that is awarded to companies that have demonstrated extraordinary levels of workplace engagement, will never stop making us proud. This year we were named Best Specialist Broker/Distributor at the Mortgage Strategy Awards for the 8th consecutive year, something we will never tire of winning. And as we now enter our second decade of trading, and our reach expands to 75% of the intermediary market, we are looking ahead to what the next 10 years will bring and we can’t wait to see where it takes us. #brightstar10years

Champion of the Mortgage Professional

MORTGAGE

INTRODUCER www.mortgageintroducer.com

November 2021

 Robert Sinclair  The Outlaw  Loan Introducer

NEW BUILD

Can the UK build its way out of the housing crisis?

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Residential mortgages

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EDITORIAL

COMMENT

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

Ryan Fowler RyanFowlerMI

Associate Editor Jessica Bird Jessicab@sfintroducer.com Deputy News Editor Jake Carter Jake@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Jordan Ashford Jordan@mortgageintroducer.com Advertising Sales Executive Tolu Akinnugba Tolu@mortgageintroducer.com Campaign Manager Esha Gossain Esha@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com CEDAC Media Ltd Signature Tower 42, 25 Old Broad Street London EC2N 1HN Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of CEDAC Media Ltd.

Let the good times roll

ovember 1 saw one lender achieve £1bn in remortgage completions according to our resident Outlaw (read his latest column on P44). That alone shows just how good the past few months have been to the mortgage broker community. Despite the negativity around the pandemic at the start of 2020 the period from then until now has represented a halcyon age for mortgage brokers. Despite expectations that the base rate would go up this month, fuelled by rising inflation and a relatively stable jobs markets, the Bank of England elected to keep it at the current record low. Mortgage lenders clearly think it is a case of ‘when’ not if the base rate will rise, however’. After a Summer of rock bottom mortgage pricing the market appears to have bottomed out with lenders now preparing for the expected rise. Many new mortgage deals have already

priced in an increase and it looks like the base rate could reach 1% by the end of 2022 - however that rise will be in small increments rather than big jumps. Despite the looming rise the housing market has yet to be hit. It seems that not a day goes by when there isn’t a new house price index reporting month-on-month increases in prices. Demand is still sky high and people, for whatever reason, are still desperate to make the biggest purchase of their lives. We move into the final couple of months of 2021 on a wave of optimism and after some of the issues the country has faced you can’t really ask for more than that. Christmas is just around the corner and considering the fact that many of us were unable to spend it with loved ones last year it looks like we could be in for a good close to the year. Let’s hope we take this positive in to 2022 and that the market continues to perform so well. M I

Speak to your business development manager today for your next residential mortgage solution

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NOVEMBER 2021

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MAGAZINE

WHAT’S INSIDE

Contents 7 9 13 14 15 17 18 19 20 22 27 37 39 40

AMI Review Market Review Education Review Networks Review London Review High Net Worth Review Recruitment Review Service Review Technology Review Regulation Review Buy-to-let Review Protection Review General Insurance Review Equity Release Review

44 The Outlaw The latest from our resident outlaw 48 Interview: A decade of achievement Jessica Bird sits down with Brightstar as it hits its 10-year milestone, 52 Cover: Making a move Mortgage Introducer and e.surv brought together a panel of experts take a closer look at the housing shortage and the key role new builds will play in making up the numbers

THE OUTLAW

SPECIALIST FINANCE INTRODUCER

RECRUITMENT

58 Loan Introducer The latest from the second charge market 62 Specialist Finance Introducer Development finance, bridging finance and more from the specialist market

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BRIGHTSTAR AT TEN

RECRUITMENT

NOVEMBER 2021

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Time to reduce the stress on Buy to Let With our new streamlined approach to calculating customers’ Buy to Let applications, you’ll find that you’ll have more time on your hands because: • we have two new indication calculators – one for smaller landlords and one for portfolio landlords • with lower stress rates for like-for-like remortgages and 5 year products, we could lend more to customers • if the rental calculation fits, we don’t need proof of income, which reduces underwriting • eligible customers will be offered two lend options - a 2 year and 5 year fixed rate • there’s no minimum income requirement For more information go to intermediary.natwest.com or log on to LiveTALK.

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REVIEW

AMI

FSCS kicks can down road Robert Sinclair chief executive oﬃcer, AMI

he Financial Services Compensation Scheme’s (FSCS) announcement that it will not be invoking the retail pool in financial year 2021/22 or asking the FCA to invoice an interim levy on firms as part of this year’s costs will be welcome news to firms. This should not be taken as a reprieve but a stay, a deferment of previously predicted costs into the next financial year as the expected firm failures have not yet crystallised.

Early indications from FSCS are that their total costs for the financial year 2022/23 will be £900m, but this has a significant degree of sensitivity and will be updated in January and then again in the April. Just an indication but this could bring about a retail pool levy of circa £200m. Whilst we fully support the valuable work of the FSCS, we remain concerned that our well managed member firms are required to help foot the bill for the costs of bad behaviour of failed firms who in some cases intentionally profiteered from and caused harm to consumers in the pensions and investment markets. As 73% of the FSCS costs come from advice more than five years ago, any actions taken by FCA today will have limited short-term impact. The

industry needs a better solution to this compensation mess – no option should be oﬀ the table.

“Early indications from FSCS are that their total costs for the financial year 2022/23 will be £900m” AMI stands ready to work with the FCA and FSCS to establish a better and fairer funding mechanism for the FSCS. Previous work on the scheme has seen the FCA at its best in promoting constructive debate. A product levy remains the best workable solution. We hope the doors to a new debate will be opened soon. M I

It’s not what you say, it’s what you do. Lucy Lewis senior policy adviser, AMI

he publication of the Association of Mortgage Intermediaries’ Viewpoint report on diversity, inclusion and equity in the mortgage industry marks the first small step of our journey to promote conversation and spur positive change. Our sincere thanks to Aldermore and Virgin Money whose support for this work and whose commitment to making our industry more equitable for all cannot be overstated. Moreover, the wealth of support from the industry, from people at all levels of organisations, is proof of the number of people listening, who recognise the need for change, the need to value diﬀerences. Diversity refers to the full spectrum of differences and similarities between individuals and includes things such as values and beliefs, life experiences and personal preferences. Inclusion refers to the overall culture of an organisation – the actions it takes – to ensure that all individuals feel welcome, supported and valued as members of the team. An inclusive culture brings a number

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of benefits to a firm. Putting aside the moral reasons, diverse businesses perform better: they achieve better financial results; are more innovative and creative; and are more attractive to future employees. Building good relationships with customers is fundamental for advice firms. It’s important that firms reflect both the customers and society that they serve at all levels of the organisation, to ensure that customers’ needs are fully understood and can be met, both now and in the future. This needs to permeate our whole sector. 43% of respondents to our survey agreed that the mortgage industry attracts a workforce that represents the diversity of the whole community. 38% agreed that diversity and inclusion are taken very seriously across the mortgage industry. 39% agree that leadership is held accountable for achieving diversity, inclusion and equality across the mortgage industry. Whilst these figures, and the quotes from survey respondents detailing issues and behaviours faced in our industry, show that there is a long road ahead of us, there are also positives to take from the research. Everyday workplace experiences are mainly positive and many respondents reported feeling included at work.

Significantly, 82% of survey respondents stated that they believe that improving diversity, inclusion and equality in the mortgage sector is important. The Viewpoint report is full of lots of suggestions of ways that we can all start to do this – both practical actions that can be taken by firm leaders as well as smaller changes that we can all make ourselves We all need to look at these actions and see what we can do to embrace inclusion. At AMI, our work does not stop with the publication of this report. We have a responsibility to help our sector build an environment that values diﬀerences and listens to all voices at the table. We’ll take an internal look to see what changes we can make to our structure and approach to ensure that diverse voices are heard. And we’ll work with firms, lenders and other trade bodies to share knowledge and good practice. We need to listen and drive change. Changing culture takes time and we ask all firms to join us on this journey, to ensure that our industry is fit for the future, attractive to new generations of brokers, and able to understand and meet the needs and requirements of all our future customers, whoever they are.

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That’s common sense lending Conversations with real people You can talk to our underwriting team if you need to.

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Accentuating the positives Xxxxxxxxxx Craig Calder director of mortgages, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Barclays

t’s now been 18 months or so since we felt the first wave of COVIDrelated panic. We’ve all learnt a lot since then, both from a personal and business perspective, as we’ve had to navigate new, ever-shifting periods of ‘normal’. The advice process has proved crucial for a vast array of people during this time, especially when it comes to meeting housing, refinancing and general day-to-day financial needs. Lending and intermediary offerings have evolved to address changes to income and the implementation of financial support measures, the likes of which we’ve never experienced before. Initially, as an industry, we had to be purely reactive but did manage to transition onto the front foot to adapt and drive change in addressing the needs of the most vulnerable A positive from the pandemic has been that many people have become more open and honest about their current finances and their future aspirations. A tendency which is opening the doors to a more holistic approach from the intermediary community. INTERGENERATIONAL FINANCIAL ADVICE

This was evident in research from analysts AKG which showed that intergenerational financial planning is set to expand in importance for advice firms. This outlined that more than half (54%) of advisers say demand for intergenerational planning has grown in the past year, with 8% saying it has increased significantly, and that rose to 88% when asked about demand over the next five years, with 25% expecting significant growth. www.mortgageintroducer.com

However, the study found that this expansion in demand will mean change for advisers. More than two out of five (44%) of advisers are said to be concerned about potential family disputes. while 38% are worried about possible vulnerable client concerns and 24% admit a lack of expertise in legal issues. 59% of advisers believe greater awareness of the impact of inheritance tax is driving demand from clients while 40% say changes in pension laws to make funds more attractive as a way of passing on wealth is adding to the growth in demand. 42% of advisers say they are now proactively discussing the issue with clients and over a quarter (29%) say the COVID-19 pandemic has increased interest in inheritance planning and financial reviews. This study crosses many advice boundaries beyond the mortgage world but it does serve to outline some shifts in consumer mentality. From a lending perspective, we have a responsibility to provide options to match a variety of borrowing needs within certain risk boundaries – and this includes allowing families to financially support their children and grandchildren where possible. This is not always an easy conversation for advisers and it’s up to lenders to find ways to better support all links in this chain going forward. CAPITAL RAISING

Staying on the topic of maximising property-related wealth, it was interesting to see data from Legal & General Mortgage Club’s SmartrCriteria tool demonstrate that searches for capital raising mortgages continued to dominate in August and September, rising by 18% overall. As such, a capital raising mortgage was the second most sought after criteria point in September, rising from sixth place in August. The SmartrCriteria tool also revealed that searches made on behalf of

international buyers grew by 160% in August. This was consistent with a 107% jump in searches conducted for international buyers with a visa. The rise in interest from international buyers has coincided with easing international travel restrictions and slowing domestic purchase activity in the wake of the end of the Stamp Duty Holiday. Other key findings included that shared ownership products saw a 4% increase in demand in September, while searches for borrowers who purchased or remortgaged less than six months ago grew by 13%. AFFORDABILITY

It’s clear that a wide variety of influencing factors continue to drive demand in both the purchase and remortgage market. Improving affordability levels lay at the heart of this. A trend which was highlighted in analysis from Mortgage Broker Tools which showed that mortgage affordability hit a 2021 high in September, with the average maximum loan size available up by nearly 10% compared to the start of the year. Analysis of real cases processed through the MBT research platform showed that the maximum loan size available to an average customer was £254,821 in September, compared to £234,224 in January. This increase was said to be primarily driven by improved options for firsttime buyers. According to the MBT Affordability Index, the maximum loan size available to an average first-time buyer was £276,060 in September, up from £230,555 in January. This represents positive news to finish on and thanks to an extremely competitive lending landscape, an increasing number of affordable and viable options will emerge to meet a broad range of borrowing needs, and long may this continue. M I

NOVEMBER 2021 MORTGAGE INTRODUCER

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Mortgage fraud – stay on red alert Steven Howard head of mortgage & lending intermediaries compliance services, SimplyBiz

s you know, the furlough scheme, which protected millions of jobs during the pandemic, was wound up at the end of September. This means that the government has stopped paying towards the wages of people who couldn’t work, or whose employers could no longer aﬀord to pay them. Recent figures showed that 1.6 million people were on furlough at the end of July, and that a million were still expected to be on the scheme at the end of September. What we may soon begin to see is the outcome of the scheme coming to an end and the impact that will cause in reality; will the many employers with workers still on furlough at the end of September soon find that they cannot aﬀord to keep them on post furlough? Many forecasters (including the Bank of England) are therefore expecting a rise in unemployment rates in the short term. In addition, we have also seen a �uarter 2 2020 to �uarter 2 2021 year-on-year rise in the number of County Court Judgements (CCJs) of 222% from £66,474 to £214,120. Much of this huge percentage rise over the year is due to the fact that judgement numbers were artificially low in Q2 2020, as government and regulatory measures, and creditor forbearance, protected many households from the economic impacts of COVID-19. Despite the rise, numbers are still well below the pre-COVID levels seen in 2019, so when aligned with the end of furlough and a continuing return to some kind of “normality”, we should reasonably expect the figure to continue rising. With all this in mind, I would like to remind everyone involved in the mortgage advice and application www.mortgageintroducer.com

process (business owners, advisers, supervisors, packagers and administrators alike) to remain extra vigilant when assessing and accepting mortgage applications from clients. In particular I would urge you to pay particularly close attention to the supporting documentation that customers supply (pay slips, accounts, bank statements etc) during the process. Many of the lenders to whom I’ve spoken recently have commented that their internal fraud teams are busier now than they were at the height of the banking crisis of 2007/8, and this situation is unlikely to change in the short term as pressure is exerted on clients to demonstrate income and aﬀordability. In particular, I would encourage you to always take time to question the plausibility of information that you are being given and that the client wants

you to supply to the lender on their behalf. Try to think like a mortgage underwriter when receiving and analysing documents and data and, if in doubt, always ask for clarification or additional information. Lender panel monitoring and broker removal activity is very high at the present time, and you should look to try and re-visit education standards with all your relevant staﬀ in order to help to maintain knowledge and appreciation of mortgage fraud risks within your firms. Financial crime represents a serious risk to anyone arranging finance for members of the public or businesses, and fraudsters are highly competent, clever and plausible when making their approach. The trick is to spot the warning signs early, so that this doesn’t have a significant impact upon your business. M I

“Financial crime represents a serious risk to anyone arranging finance for members of the public or businesses, and fraudsters are highly competent, clever and plausible when making their approach”

NOVEMBER 2021

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Lenders must meet levelling up plan Tim Hague director, Sagis

he recent appointment of Michael Gove as the Secretary of State in charge of housing and communities with the additional remit of the government’s “levelling up” agenda has put the kibosh on his predecessor’s strategy of build, build, build. Out with the old and in with the new, it now looks like developers aren’t going to get their way and local communities will retain their rights to block the influx of thousands of new houses on their doorsteps. Planning reform aside, Mr Gove has also inherited some seriously difficult issues to deal with in housing, the most critical of which is the cladding scandal. Barely a day passes that doesn’t see the papers feature the woebegone picture of a homeowner trapped in unsafe housing facing a bill of tens of thousands of pounds to fix it. UNSAFE HOMES

Despite billions of pounds being made available for property remediation works by some developers (note, not all) and the government, the reality is that there are millions of people in the UK still living in homes deemed unsafe following the Grenfell Tower tragedy more than four years ago. While Mr Gove is already under mounting pressure to meet the costs of making voters’ homes safe to live in, mortgage lenders face the challenge of managing the existing risk represented by these buildings. Over the summer the government u-turned on its blanket requirement that blocks under 18 metres needed an EWS1 form before a mortgage

could be granted. Reports in the press suggest that borrowers are still facing strict safety checks when it comes to remortgaging with UK Finance telling The Guardian: “Lenders’ policies reflect their respective commercial and risk appetites for lending on flats with cladding, recognising that both the government’s advice note and the Royal Institution of Chartered Surveyors’ guidance in this area both remain in place.” The risk remains for lenders. It might not feel fair for leaseholders, but it’s undeniable that the existence of cladding on properties affects their value, and that affects the LTV when it’s time to refinance. It’s unclear what direction the government will take on this issue but in the meantime, lenders must develop and evolve their lending propositions to cope with the changing landscape. Inevitably this will mean supporting high loan-to-value lending, which will pose risk concerns for credit boards. Yet, the signs are that lenders are edging up the risk curve for the time being. Rates are coming down on high LTV products in pockets of the market; lenders are adding more high LTV products to their ranges. Data from the latest Moneyfacts UK Mortgage Trends Treasury Report shows strong competition among providers has resulted in significant reductions across higher LTV tiers in the past month. While we’re seeing some incredibly low rates on low LTV deals, in fact Moneyfacts analysis shows the most dramatic month-on-month average rate cuts to LTV tiers were recorded at 90% and 95% in October, where the 2-year fixed rates dropped by 0.29% and 0.25% to 2.56% and 3.32% respectively. October was also the month that saw the end of the stamp duty holiday, furlough scheme and the higher weekly universal credit payments. Inflation

MORTGAGE INTRODUCER NOVEMBER 2021

is running high with the Bank of England’s expectations still that CPI will pass 4% by the year end. Gas prices are spiking, wage inflation is unlikely to keep pace with cost of living increases in the short term and the net result is that the pounds in people’s pockets are going less far than they used to. LENDER DECISIONS

All of this feeds into both monetary and fiscal policy, as well as decisions made by the government which affect society and individuals. Supporting high LTV lending is capital intensive but is going to be crucial over the term of this parliament, meaning lenders have some tough decisions to make. Lender propositions will need to evolve to understand better the panoply of risks facing them. Traditionally lenders have focused more on the borrower and less on the property, taking comfort from the protective cover of lower LTVs. A borrower’s ability to pay is one thing, but property risk, the performance of buildings, will become a source of greater risk and opportunity. How you begin to take advantage of that is key. Data will help but its quality, accuracy and timeliness will require experience and judgement. There is also the issue of social housing, which Michael Gove has already raised as an area he looks set on addressing during his tenure. At a Conservative Party conference fringe event in Manchester, Mr Gove said: “The supply of social housing overall has not kept pace with the demand and also the quality of social housing, particularly in some parts of the country, remains scandalously poor.” This is significant for planning reform and the levelling up agenda, with the proposal to scrap section 106 requirements for building affordable homes and social housing almost inevitably destined for the bin. Where the government chooses to target its focus will have a bearing for all lenders, who will have to think carefully when it comes to designing propositions that are fit for the future we seem to be heading for. M I www.mortgageintroducer.com

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EDUCATION

Broaden your skills and experience Gordon Reid business development Xxxxxxxxxx manager, learning and xxxxxxxxxxxxxxxx, development, LIBF xxxxxxxxxxxxxxxx

uccessful businesses, sports teams and individuals never stop learning. The same applies to mortgage advisers. So, what should you think about when planning your professional development? WHAT DO YOU WANT TO ACHIEVE?

What expertise or role do you aspire to? You need to work out how to get there. A good approach is to look at what successful individuals in that role have that you don’t. Is it knowledge? Professional experience? Specific qualifications? It could be a skill that you haven’t yet developed, or a way of working that you’ve not tried. It could be the learning they’ve gained from working in other roles or sectors. If you’re happy where you are, you still need to think about continuing professional development because the world does not stand still. Again, professional sports provides some great analogies. Think about a golfer or tennis player who was successful ten years ago and how their sport has changed in the intervening period. Their competitors have got stronger. Their equipment has developed. The playing environment is different. If they haven’t adapted, are they still at the top of the game? How is your role evolving? And how might you need to adapt and upskill to continue to be effective? PRIORITISE YOUR DEVELOPMENT NEEDS

Once you’ve worked out where you want to be, the next step is to think www.mortgageintroducer.com

about which knowledge and skills you need to develop first. You can do this by asking questions like:  where is the biggest gap in my knowledge or experience?  which need, if addressed, will make the biggest difference to my working life or future career?  what am I most passionate about developing?  what do I have the time to do, right now? Unless you ask these questions, you run the risk of spending time on something that you’re not fully committed to or, worse still, something which won’t help you get to where you want to go. IDENTIFY WHAT YOU NEED TO LEARN – AND HOW

Now you’ve identified where you want to develop, you should look at the learning solutions which will help you address the development needs you’ve prioritised. To do that, it’s essential to fully understand the options you have and which best suit your way of learning. Useful questions you might consider include:  will you benefit from shadowing someone skilled in the area and observing what they do?  how can you make the most of feedback from your colleagues?  do you learn by reading and then applying theory in practical situations? Or is audio-visual learning more your style?  is a group workshop or one-to-one coaching session what you need? We’re all different and we all learn in different ways. You may have one preferred learning style or benefit more from combining two or three. But whatever your learning style, it’s so important to recognise and understand how you study and

absorb information most effectively. This will help enormously if you decide to expand your knowledge by undertaking an additional qualification, perhaps to advise in equity release for example. Look at the study materials available with the qualification. Will they be enough to support you studying independently or would some additional learning materials help you get a better grasp of the subject? Perhaps you’d prefer to have someone to guide you through the syllabus, through a tuition video or even a live workshop. PREPARE FOR WHAT’S TO COME

You can apply these three simple steps whether you’re looking to be the best you can be in your current role, thinking of moving into a new advice area or just ready for a new challenge. Whatever your requirements, if you follow these basic steps – and answer the questions above as honestly and accurately as you can – this process will help you find development activities that are relevant, enjoyable and relatively simple to complete. That will make your professional development easier to achieve and much more rewarding. Because the truth is you simply can’t afford to do nothing. Virtually, every aspect of mortgage advice has changed over the last ten years: from regulation, technology, policies and processes, to the structure of the marketplace, how we interact with customers and other key relationships which, as mortgage adviser, you need to develop. If there’s one thing which we know for sure, it’s that this pace of change will continue, if not increase, into the future. Those who choose to allow the change to go on around them will quickly be left behind. But change also brings opportunity. And by broadening your experience, expanding your knowledge and developing your professionalism and skills, you’ll be well placed to take advantage of all the opportunities the future holds. M I

NOVEMBER 2021 MORTGAGE INTRODUCER

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NETWORKS

Together again Shaun Almond managing director, HL Partnership

fter several false starts, at the end of September, HLP returned to face-to-face conferencing after being virtual over the past two years. Even the threat of petrol shortages and a rise in COVID cases failed to dampen the enthusiasm of members to attend. It was thrilling to welcome a full house of delegates for a day’s agenda of industry topics and regulatory insight as well as a turnout of product and service partners in a dedicated area of stands, which would have been the envy of even the biggest expos. Appropriately, the principal theme of the day was ‘Together Again’ and, whilst I am sure it has been duplicated across the country, the post lockdown euphoria of being able to meet colleagues face to face was very much in evidence. Among the topics discussed were green mortgages, the mechanics of mortgage pricing, challenges and opportunities in the coming year, technology and how it can support human expertise. There was no surprise that the green agenda was one of the talking points, with the sobering statistics demonstrating how far we, as a nation, have to go to cut emissions. According to one of the

presenters domestically 29 million homes cause up to 15% of our total emissions. However, even with the increasing focus on green issues and the government’s plan to reach zero emissions by 2050, research indicates:  56% of the public are still unaware of the dangers of CO2 emission.  75% do not understand the concept of net zero.  90% do not know or understand what an EPC is. Overall, the conference was a huge success, not least because it lived up to its billing of bringing everyone together again. Whether you are a member of HLP or not, I hope we can agree that while video conferencing has been a godsend, we are all social animals and we do our best business when we are engaged with customers and colleagues face to face. It is a shame that it has taken a pandemic to make us realise the true value of the relationships we have and those we are yet to forge. Even in my position running a leading a pure AR network, I have always tried to be even handed in understanding the DA vs AR debate. Obviously, each regulatory status has its supporters but, in the end, brokers must make a decision based on their own circumstances and inclinations. To me, much of the debate hinges around the emotive word ‘independence’. An understandable desire to plough one’s own furrow without being beholden to a corporate entity or employer. There is a strong

Following a number of false dawns we are once again holding face-to-face conferences

MORTGAGE INTRODUCER

NOVEMBER 2021

argument that if a decision is taken to start a brokerage, why would you then ‘give up’ your independence to become an appointed representative? I do admire firms that decide to go it alone because I know, having had many conversations with DA firms, just how resourceful owners have to be to cope with the day to day issues. Coping with compliance, file checking and reports, maintaining relationships with lenders and other service and product providers, keeping abreast of market and regulatory issues and making sure to stay competitive as technology drives constant reinvestment. Let’s also not forget about the annual hunt to source affordable PI, paying the ever increasing annual FSCS levy and keeping up with the latest in CRM platforms. All the while, finding time to source new business and giving existing customers the level of regular attention that they deserve. To me, all the added effort appears as a very high price to pay to be a DA firm, unless there is suitable infrastructure to cope. To be honest, no-one is truly independent as we all work within the rules set by the FCA. As we have to comply in exactly the same way, being relieved of the administrative burden of compliance, an AR has more time to concentrate on building their businesses and meeting more customer needs. How about ‘independent’ advice? Every DA and AR firm offers advice from a representative panel of providers, unless driven by a commercial bias to restrict choice, which means that advice and recommendations are considered to be independent, whether from a DA or an AR firm. So, no real differentiation there either and as far as customers are concerned, Bloggs & Co on a letterhead or on an office window looks the same whether it is a DA or an AR firm. Just to add spice to the debate, the FCA will shortly be announcing its Consumer Duty initiative, which will provide yet another challenge for every regulated firm and principal. M I www.mortgageintroducer.com

REVIEW

LONDON

A change of tack for the housing market Robin Johnson managing director, Kinleigh, Folkard and Hayward Professional Services

new dawn, a new day and yet another government review for housing. Boris Johnson’s recent Cabinet reshuffle placed Michael Gove in charge of the Ministry of Housing, Communities and Local Government, taking over from his predecessor Robert Jenrick from office. Almost immediately after the announcement, Gove was reported to have put planning reforms scheduled for later this year on hold, with Conservative party chairman Oliver Dowden later confirming government is “looking again at planning reforms”. In early October, The Times reported that Gove, now head of a newly renamed MHCLG, the Department for Levelling Up, Housing and Communities, has ordered a “complete rethink” of the proposals, indicating an intention to abandon the relaxation of rules championed under Jenrick. The Planning White Paper published last August had proposed introducing “area-based” planning giving councils less power to block developments and encouraging “growth areas”. Section 106, which forces developers to include a minimum number of affordable and social homes in new housing developments, was also slated to be axed. During his Manchester speech, Dowden said government would now look to “set out in law measures to protect our towns, villages and precious countryside from being despoiled by ugly development”. Taken together these steps reveal something of the direction of travel for www.mortgageintroducer.com

housing, and crucially investment in communities, over the next three years. The government seem to have cottoned on to the fact that their core voters don’t want their views blocked with thousands of new houses crammed in and no extra amenities. It also means that the aim of delivering 300,000 new homes a year which has dominated housing policy for almost 20 years looks less important for this government. The question now is what do we do with the people who need homes? The pandemic has wrought social change in the space of 18 months that no-one could have fully foreseen and the result has left visible marks on our towns and cities. The great escape to the country has freed up city living in some areas,

“Already we have seen several ministers urge workers back to their desks; there must be a clear move to regenerate our cities and urban hubs as part of this” though in truth, increasingly employees are being expected back in the office which is likely to stem the outflow. Months and months of lockdowns have also decimated our high streets, restaurants have closed, pubs stand derelict, shops sporting To Let signs are ubiquitous in every town centre. What is the answer then? While I write this before the government’s Spending Review, due on 27 October, I suspect that we will see something giving a bit more clarity on what this government actually means by levelling up. Already we have seen several ministers urge workers back to their desks; there must be a clear move to regenerate our cities and urban hubs as part of this. What does this mean for housing?

Well in places like London, it’s very positive news. Prices are still rising, though much less rapidly than in the rest of the country, and renewed energy in the city centre is proving a confidence boost for investors and foreign buyers. Much of the disused commercial property available currently could usefully be destined for permitted development and end up as residential stock. The latest provisional seasonally adjusted estimate of UK residential transactions in September 2021 is 160,950, 68.4% higher than September 2020 and 67.5% higher than August 2021. This figure is phenomenal and reflects the last minute rush to get transactions over the line before the stamp duty holiday finally ended. While volumes are unlikely to reach such artificially inflated highs consistently from here on in, the flood of moves has breathed significant life into the housing market and the momentum will persist. Transactions in October were still very healthy, even now we are back to basics on stamp duty. The latest RICS residential survey showed near term price expectations remain positive, as a net balance of +21% of contributors anticipate an increase in residential values over the coming three months (net balance was +23% in August). For the next twelve months, a balance of +70% of respondents foresee further price growth, with expectations firmly in expansionary territory right across the UK. In the lettings market, tenant demand also continues to rise according to a net balance of +62% of survey participants. This latest reading is in line with those seen over the past four months and remains elevated when placed against the long run average of +19% for this indicator. All this points to a healthy market as we move towards the end of the year. While Gove’s Levelling Up Taskforce is not due to report on the full details of its plan for another six months, it’s my view that those of us in the housing industry can rest easy that it should support a strong market. M I

NOVEMBER 2021 MORTGAGE INTRODUCER

REVIEW

HOLIDAY LETS

Holiday lets are here to stay Jacqui Turner BDM Northern Region, Harpenden Building Society

n a time when the UK staycation remains the holiday of choice for many Brits looking for convenience, safety and the great outdoors, holiday lets continue to provide a strong option for brokers and their investor customers as demand for holiday accommodation continues. AN ONGOING OPPORTUNITY

With Christmas breaks being planned and 2022 holiday options under consideration or booked, there appears to be no let-up in the demand for holiday let staycation breaks. As we all saw, the UK staycation was a popular holiday option for many during 2021 and a trend set to continue. Recent research commissioned by UK holiday firm Hoseasons showed 83% of those who took a staycation break this year hope to do so again next year, with 24% already planning their next trip. Proactive initiatives to build domestic tourism like last month’s National Lottery Days Out campaign, offering £25 off trips to hundreds of top attractions across the country, alongside Britain’s natural tourist assets and the international travel restrictions we all need to consider, are fuelling staycation uptake. WIDE APPEAL

There is demand from all age groups wanting to holiday in the UK including younger generations who may have opted for an overseas ‘get away’ in prepandemic times. Chloe Ring (23) from Hertfordshire where our Society is based told me: “I’ve always had the travel bug and been lucky to visit many different parts of the world. When COVID hit, my future plans had to change and I looked for holiday options closer to home in

Britain. I explored Snowdonia this year staying in a series of really cool Airbnbs. North Wales is absolutely beautiful, I’d forgotten how much I love it there! It reminded me of childhood holidays, I explored new areas and the holiday accommodation had so much to offer. I’ll be back again next year, 100%!” The holiday let property market remains buoyant due to all the factors mentioned. As a specialist lender we envisage significant, continuing opportunities for mortgage brokers keen to meet the demand from investors wanting to purchase good quality, self-catering options and the additional income this affords. A SPECIALIST LENDERS’ APPROACH AND BENEFICIAL USP’S

With Harpenden’s new, improved holiday let products, in regard to pricing and criteria (2-year discount repayment 2.99%/3.49%; 2-year discount interest-Only 2.99% / 3.49%; repayment 75% max LTV; interest only/part & part; 70% Max LTV), we’re already seeing raised interest from brokers and their customers wanting to buy domestic, holiday let properties. It’s not just about price and criteria though, it’s important to partner with a lender experienced in providing this multifaceted product and all it entails. As a specialist lender we are able to consider complex income streams for instance, which mainstream lenders may not, because we employ manual underwriting rather than a computer algorithm. One of our unique selling points is that we will consider holiday lets that are adjacent to or above commercial premises. We will allow up to four applicants on a mortgage application and will use all four incomes. We will consider properties in city centres on a holiday let basis, and we allow for both Airbnb, or short-term rentals. Lastly, we allow customers to use

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“It’s important to partner with a lender experienced in providing this multifaceted product and all it entails. As a specialist lender we are able to consider complex income streams for instance, which mainstream lenders may not, because we employ manual underwriting rather than a computer algorithm” the holiday let property themselves for up to 90 days per year giving owners a holiday home that they can use themselves and a property that provides an income option during the remaining, majority weeks of the year. We require a minimum income of £30,000, and evidence of three months’ mortgage payments and running costs for the client to qualify. To establish maximum loan guidelines we take an average of the high, mid and low season weekly rental figure and multiply by 30. The rental stress rate is 135% x 5.5%, but please note that we accept unlimited topslicing from earned income to make up the rental shortfall, providing the client can afford it as a monthly commitment. GROW YOUR BUSINESS IN THE YEAR AHEAD

Living in the beautiful Yorkshire Dales is a daily reminder to me of the holiday let potential on my doorstep, never mind the opportunities throughout Britain. With holiday let enquiries from brokers at an all-time high over recent months, it continues to be a busy time at the Society. If you think your customer has a strong application for a holiday let property and is looking to capitalise on the increasing opportunities relating to this sector, we would be delighted to MI discuss the options further. www.mortgageintroducer.com

REVIEW

HIGH NET WORTH

Irrregular income and private equity clients Peter Izard head of intermediary business development Investec Private Bank

ith irregular income structures and complex financial profiles, private equity professionals often face many challenges when it comes to securing a mortgage or other lending products. Here’s how brokers can help. Each year at Investec, we try to understand the challenges that private equity professionals face in our annual GP Trends survey. In this years’ survey, 69% of UK respondents reported that financial organisations don’t understand the income profile of those working in their sector. Many professionals in private equity have a complex income structure consisting of a base salary, bonus and carry and this can complicate affordability calculations. Therefore, it’s important for brokers and lenders to work together to evaluate their wealth in order to meet their unique needs. Here’s a recap of the common characteristics and approach that brokers can take. THE LIFECYCLE OF A FUND, AT A GLANCE

In order to understand a private equity professionals’ income structure, it’s important to first understand the lifecycle of a fund. A private equity fund is formed by a group of investors looking for enterprise opportunities in the market. The founders of this fund encourage other investors — whether pension funds, individual investors, or other investment bodies — to contribute capital. While these investors don’t directly control the fund, they can benefit from its performance. These www.mortgageintroducer.com

individuals are known as limited partners. In an effort to reassure limited partners of their faith in a fund’s ability, the founders will often put a large amount of their personal wealth into the fund. This is known as a co-investment, or co-invest, and forms the basis of the initial investment. Additional investors may join the fund in the future, but the money is generally invested over a long period of time. Once a fund begins to perform well after a specified period (usually five or ten years), the founders of the fund will then start to sell the investments for a profit. Once investments are sold, these investors may start to realise significant wealth. If the fund was successful, the value of their initial investment will have increased. On top of this, they will receive what is known in the industry as ‘carry’. Carry is a proportion of the fund’s profits after other investors are given their return. It is typically vested over a few years, and is received on top of annual bonuses and basic pay. In addition, some of this remuneration may be received in a foreign currency. HOW CAN BROKERS HELP?

As a private equity professional’s income structure can be irregular and unpredictable, this can complicate the affordability calculations required for

a mortgage. Therefore, brokers should look to work with a lender that can take into account clients’ specific needs and consider co-investment, carry and bonuses when calculating affordability, in order to tailor a repayment plan that suits them best. Over the last year at Investec, the majority of requests from our Private Equity clients have been for mortgages for new homes and for second homes outside of London. We have a team dedicated to supporting individuals in this sector and we are familiar with the unique nature of each firm and the pay structures involved. Brokers should also consider the appeal of re-mortgages for clients. Private equity professionals, particularly those at senior level, may have wealth invested in a number of properties. Re-mortgaging these assets can be an effective way for them to gain liquidity without having to sell. Another option might be a revolving mortgage which enables eligible clients to have access to a flexible line of credit. The interest-only loans can unlock the equity in a main home by allowing individuals to withdraw additional funds when they need to and repay them over a ten-year period without early repayment charges. Crucially, by having these options brokers can progress deals more efficiently. In addition, by demonstrating an understanding of the unique needs of this client base, and working with a partner that can support these needs, brokers can hope to provide a highly valuable service to private equity professionals. M I

A private equity professional’s income structure can be irregular and unpredictable

NOVEMBER 2021 MORTGAGE INTRODUCER

REVIEW

RECRUITMENT

Asking about current salary Pete Gwilliam director, Virtus Search

lthough a potential employer does not need to know your salary history before hiring you, in some cases you may be asked or at the very least asked what your salary expectations are. I certainly advocate that having a plan for how you will address such questions about your remuneration expectations will help you remain professional while navigating that conversation. The expert knowledge of recruiters about current trends and salary bandings for different role types, seniority and region is certainly something to draw on for both employers and candidates alike, but the underlying issue about asking specifically for a candidates’ current salary is that it undermines all diversity, equity and inclusion initiatives. When you base someone’s salary on their previous pay, you are inheriting gender, race, and social class gaps in pay from their previous experiences. Although many employers are attempting to close the pay gap as they strive for equality in the workplace, so potential employers who use historic information as the basis of a suitable offer to attract a candidate are not really valuing candidates on their level of skill and whether they bring additional perspectives and values to the culture. Of course, many firms have bandings associated with the level of a role, and the opportunity to earn according to the new challenge will be framed by a salary range and bonus and benefits commensurate with a grading attached to the role type, and surely therefore the applicant’s credentials presented in the selection process, considered against the qualities and value offered by internal and external comparison is a

much less biased way of deciding what salary someone is worth. Pegging a candidates’ new salary to their previous salary has little rationale and yet it’s still part of many recruitment discussions. Obviously candidates who have taken time out of the workplace or indeed those who have been employed in regions that historically have paid less can be really disadvantaged. Several cities in the United States have made it illegal for employers to ask candidates a salary interview

Focus on merit rather than salary

question and where the salary history ban has been enacted have reported a 5-6% increase in pay has been seen for people moving jobs. But more importantly, the boost was larger for women (8-9%) and African-Americans (13-16%). There are growing calls to ensure Salary bias does not follow a prospective employee throughout their career and there is no reason why employers can simply ask what someone’s expectations are. A further reason to remove this from your hiring mindset is emphasised by a

MORTGAGE INTRODUCER NOVEMBER 2021

feature on CNBC that reveals a quarter of Europeans fabricate their salary during job interviews and 40% of those embellished their earnings by 20%. The Viewpoint on Diversity, Inclusion and Equity in the mortgage industry study comprises the results of its survey conducted in July, in which 1,178 people shared their perceptions and lived experiences of diversity and inclusion in the mortgage industry. The data highlighted that straight white men consistently earn more than their colleagues, and income inequalities increase with seniority, for example, in the two highest income brackets: 15% of straight white men in the sample earned between £90,000 and £125,000, significantly outnumbering women (6%), LGBTQ+ (2%), and colleagues from ethnic minority backgrounds (5%). In addition, while 17% of straight white men earned more £125,000, only 2% of women, 4% of LGBTQ+ people and 5% of ethnic minority people reached this income level. Of course, pay gaps aren’t simply fixed by removing the “what salary do you earn?” question from selection processes employer, but from 2017 Employers with a headcount of 250 must comply with regulations on gender pay gap reporting, and I’m sure this is likely to be followed by ethnicity pay gap reporting becoming compulsory too, and thus there is a need to start taking action now , especially when you consider according to the Viewpoint report, 50% of LGBTQ+ people, 46% of women, and 43% of people from ethnic minority backgrounds believe there is a lack of transparency over pay and rewards in the mortgage sector. So, let’s all focus interviews and selection on candidates who fit the requirements and can do the job regardless of salary they have been earning. Let’s not assume previous earnings dictate what value we believe someone can offer. M I www.mortgageintroducer.com

REVIEW

SERVICE

Build back better building societies role Stuart Xxxxxxxxxx Miller chief xxxxxxxxxxxxxxxx, customer officer, Newcastle xxxxxxxxxxxxxxxx Building Society

e know we need to build new homes but as an island nation where land is not infinite, finding somewhere to build them is usually contentious. It is a pressing concern for many Britons. So much so that even Boris Johnson, as reported in the Telegraph, promised the party faithful at the recent conference in Manchester that he would resist further attempts to build on green belt. Build back better by all means – just not in my back-yard. In the North East, we have very recently experienced the dichotomy that this can present. The Yorkshire Post reported in October that an 83-home development on green belt land in a village near York has won approval from councillors – despite considerable opposition. Members of the planning committee agreed with City of York Council officials, who said there were ‘very special circumstances’ that outweighed any harm to the green belt land off Eastfield Lane, Dunnington. The plans for a mix of one, two, three and fourbed properties, including 25 affordable homes, attracted 59 objections – including from Dunnington Parish Council – and four letters of support. This is not just an issue in the North East. Local plans for housing on green belt have quadrupled in the past eight years, according to research conducted by CPRE, the countryside charity formerly known as the Campaign to Protect Rural England. The annual State of Greenbelt 2021 report, published in February this year, revealed there are currently quarter of www.mortgageintroducer.com

a million (257,944) homes proposed to be built on land removed from the green belt – over four times as many (475% increase) as in 2013. With only one in 10 considered affordable, these new homes will do little to tackle the affordable housing crisis, said the charity. Why revisit this now? Well, last month following a Cabinet reshuffle minister Michael Gove took over the Ministry of Housing, Communities and Local Government. It was swiftly renamed, and on 15 September 2021 Gove was confirmed as Secretary of State for Levelling Up, Housing and Communities.

“Achieving a fair financial future for all isn’t just about building more houses; it’s about being willing to adapt to a changing financial reality” He paused previously planned relaxation of permitted development rights and then announced government funding of £57.8m allocated to councils to develop brownfield land into good quality housing while “transforming derelict local areas”. “The funding will boost local areas by transforming unloved and disused sites into vibrant communities for people to live and work, with the demolition of unsightly derelict buildings and disused car parks and garages. This will help to protect countryside and green spaces while an extra 5,600 homes are built on these sites, supporting young people and families across the country into home ownership,” said the department. We welcome all government support designed to make life fairer financially

for residents around the UK and we are also supportive of initiatives to drive homeownership in this country, particularly because it is that which has the greatest power to boost individuals’ financial resilience long-term. This said, the private sector also has a part to play and the role of mortgage lenders is especially important. The past 18 months have seen lenders batten down the hatches where there is a perceived risk, to the detriment of borrowers who are self-employed, were made redundant and suffered financial blips as a consequence and those whose credit records aren’t perfect or who haven’t managed to save more than a five% deposit (even if that means saving £50,000). The availability of homes is without question an important factor in young people’s ability to get on the property ladder, but without flexible common sense mortgage lending, the number of empty properties on the market is largely irrelevant. It’s for this reason that we are so passionately committed to supporting the high loan-to-value market; it is just one way of delivering choice and options for borrowers in a market that is more concerned with taking a share of low return but low risk lending than with supporting a competitive range of products that serve today’s customers’ needs. We recently committed to offer 5% deposit mortgages for buyers of new-build properties under an innovative mortgage scheme, Deposit Unlock, developed with the Home Builders Federation and its members. Deposit Unlock aims to give smalldeposit buyers more borrowing options, by allowing them to secure a new-build home up to a value of £600,000 with a deposit of just 5%. After an initial pilot in the North East of England, this has now been rolled out nationally through Barratt Developments, Bellway, Keepmoat, Vistry and Crest Nicholson. And more new homes developers are getting involved. Achieving a fair financial future for all isn’t just about building more houses; it’s about being willing to adapt to a changing financial reality, offering individuals as much flexibility as we can when it comes to buying a home. M I

NOVEMBER 2021 MORTGAGE INTRODUCER

REVIEW

TECHNOLOGY

Building the green housing market Steve Carruthers Xxxxxxxxxx principal mortgage consultant, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Iress

e have had some major announcements from the government on housing in the past month - a new minister in Michael Gove, a rebranded department with new responsibility for levelling up society as well as housing and communities, and the arrival of the government’s Heating and Building Strategy. The latter of these confirmed government is “considering how we can kick start the green finance market and have consulted on introducing mandatory disclosure requirements for mortgage lenders on the energy performance of homes on which they lend, and on setting voluntary improvement targets to be met by 2030”. In addition, this strategy revealed government is also considering the case for setting a date to ensure that all homes meet a Net Zero minimum energy performance standard before 2050, “where cost-effective, practical and affordable”. It also indicates that the role of mortgage providers and other lenders in helping to enforce minimum standards is under active consideration too. Arguing the point on net zero is no longer productive; the fact is we are all legally bound to our 2050 target. However, the change required to meet this and earlier carbon reduction targets is seismic. The Committee on Climate Change states that 40% of UK emissions come from households, with much of this produced by gas-reliant heating systems. Its proposed grant to help households switch to heat pumps goes some way to addressing who pays for the upgrades needed to cut a property’s emissions. But there is also energy efficiency to consider, along with

MORTGAGE INTRODUCER

better insulation, smarter lighting and appliances and smart heating systems to minimise the amount of energy lost and used in the first place. Just days after the scheme’s announcement critics began to warn of the unintended consequences, with poorer households unable to afford the refurbishment required to make homes efficient enough to qualify for a new tenancy and/or mortgage renewal. Liberal Democrat leader Sir Ed Davey told the Daily Mail the green mortgage minimum energy standards risked becoming a “green cladding scandal in the making”. I make no comment on the politics of this, but there is a very real implication for those of us working in the mortgage market. FINANCIAL PRESSURES

Lenders must balance their own risk management when it comes to their back book and active lending against a policy environment that will inevitably put financial pressures on some parts of the market more than others. Unfortunately, those borrowers who are already underserved, arguably by a market that is vying for high quality low risk assets and borrowers, are likely to be disproportionately hit by a move to a greener world. Homeowners who decide to retrofit and adapt their homes will need good advice to ensure any investment works on all levels for them. Lenders must also consider a complex interplay between a property’s energy efficiency, its owner’s ability to finance improvements, its value (and whether improvements are made well or poorly is a big consideration on value), government policy and pressure and the wellbeing of their customers. Financial access is a major consideration for lenders, and in the context of the Ministry of Housing, Communities and Local Government transforming into the Department for Levelling Up, Housing and Communities, ensuring that the socially and financially disadvantaged are not disadvantaged further is presumably only going to get more important.

NOVEMBER 2021

How lenders respond to this will have to be navigated carefully, with joint committees and steering groups within UK Finance critical to ensuring that the market overall does not inadvertently trigger a systemic problem by pursuing only the low risk security. Levelling up, the green agenda, ongoing climate change, flooding, subsidence, leasehold, cladding, fire safety and now efficiency linked pricing in home finance presents a more complicated picture than ever before for lenders – and for valuers. When it comes to placing an accurate value on a property, we are facing enormous change in factors we are being asked to consider. A property’s location, condition, exposure to environmental risk and criminal damage have always fed in to how much it is worth. The difficulty now is that there is considerable work to be done to quantify accurately how government policy affects these factors. Lenders are coming at this with little data to fall back on and everyone is keenly aware that forecasting is only as good as the variables you put in. It is an absolute guarantee that there will be things we don’t know we don’t know which can and probably will throw every estimate off. Surveyors have an unenviable job on their hands amid so much change; guidelines can only take us so far. Technology and modelling needs careful thought if it is to consider the valuation implications that recent policy targets pose overnight. Consumer behaviour may shift away from period homes towards more energy efficient new builds, particularly if mortgage costs and a carbon tax makes the former a far more expensive way to live. None of this is insurmountable for lenders. All of it requires a considered, thoughtful, and systematic approach to the detail. It isn’t going to be easy but getting it right could help us to save the planet and look after the people on it to boot. M I www.mortgageintroducer.com

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REVIEW

REGULATION

The arrival of ‘Consumer Duty’ Tony Marshall managing director, Equifinance

can’t remember a time, in the last ten years particularly, when the lending industry had a moment to stand still and reflect. Of course, innovation, technology and regulation wait for no one, and the lending market is no exception. Today’s market is light years from the industry I came into and is the better for it in all three areas. Of these, technology has made the biggest impact because without it innovation and compliance in its present form would not be possible but for massively expensive manual intervention. At one level, technology has allowed us to develop services that are faster and easier to access. For brokers, it has allowed better analysis of alternative lending propositions, execution and transmission between lenders and customers. The same is true of managing compliance within the adviser and lender community. Given the scope and scale of staying in step with today’s regulatory requirements, it would be unthinkable that maintaining a fully compliant regime could be achieved

economically without modern technology tools. You might of course disagree with me putting technology before regulation. All I can do is reiterate my point above that in its present form and the different iterations that have led to where we are now, technology is the glue that allows it to work as well as it does. That said, regulation has had a transforming effect on an industry which is now manifestly more professional and accountable. The guiding principle of customer care runs through the centre of the regulatory canon as Blackpool does through a stick of rock. The effort to bring the industry to this point has not been without bumps in the road. However the direction of travel has long been fully accepted and with rare exceptions, any infractions have been down to interpretation rather than deliberate attempts to break the rules or guidelines. As we look forward to what 2022 will bring, one of the near certainties is that we are set to consider the regulator’s desire to make more use of data to better manage and inform good customer outcomes. This suggests that new reporting requirements will require regulated firms to improve as well as increase the volume and quality of the data they collect. I can’t speak for other lenders, but I have no doubt we will find the capacity to comply

FCA: “We need to ensure our regulation adapts to the changing market environment”

MORTGAGE INTRODUCER NOVEMBER 2021

when required – thank goodness for technology! The burden will be felt more keenly by directly regulated intermediaries. The new responsibility, manpower and time demands required will need to be assessed when the latest changes go active. However, smaller firms might struggle to accommodate these changes, while firms working under a network will be shielded to an extent by their network principal. 2022 is also likely to see the arrival of ‘Consumer Duty’. In a speech to the Westminster Business Forum on the 8 October, Nisha Arora, director of consumer and retail policy at the FCA said, “We need to ensure our regulation adapts to the changing market environment. When we think back to how different consumer credit was five or ten years ago, it underlines the importance of adaptive regulation that can respond and develop as the market does. “The proposed Consumer Duty will set the standards for firms in all retail markets including consumer credit. Firms will have to have a greater focus on consumer outcomes and act to enable these. They will need to test what happens when consumers use their products and services – if credit products are causing financial harm or aren’t delivering the right outcomes, firms will need to fix this. “Later this year, following our recent consultation, we plan to consult on proposed rules and set out our approach to supervision and enforcement under the new Duty.” What we understood as part of TCF is being taken to the next level and we all need to be prepared to step up. One small point to bring the topic back to the second charge market - it will be interesting to see whether declining to advise on second charge or telling clients that a remortgage is the only legitimate way to capital raise will still hold water when Consumer Duty arrives. Likewise, the opposite also applies! M I www.mortgageintroducer.com

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INTERVIEW

TRY FINANCIAL

Honest, transparency and i Mortgage Introducer caught up with the team at Try Financial to find out what the business stands for and their plans for growth

You’ve an experienced team at Try. For

those who don’t know the business, can you tell us a bit more about the company stands for? Try Financial was first established in 2013 as a business operating in the secured loan market, and it wasn’t until 2015 that it started to take on the makings of its current guise, once our application to become Principals was approved the FCA. The business was started literally from scratch and has grown largely from turnover and capital retained in the business. The company is based in Ipswich and has a family flavour to it with father and son, Barry and Aaron Scott being the cornerstones of our head office team, from the very beginning. The fundamental philosophy at Try is to be honest and transparent in all aspects of our dealings, whether they are with clients, product suppliers or third parties with whom, we trade and engage. Sometimes, being candid doesn’t go down well but, many customers do appreciate the direct style and the wish to be told the truth however good, or upsetting, that may be. As a business which is proud to be regulated, we believe the Financial Conduct Authority’s Principal 1, is number one on its list for a reason, and we take it extremely seriously, as we all should. The concept of fairness is bound into everything all brokers do in our industry, and we extend this further by being as open and inclusive as we possibly can. Our doors are open to all sections of our society, and we strive very hard to treat everyone the same whether they are customers or, our representatives and introducers. The business is also lean. We took a decision quite quickly after we were established to be as paper free as possible. All aspects of our business are geared to high quality service at the lowest unit cost. The use of technology is key to everything we do, from ensuring fair outcomes, to efficient customer journeys and compliance management regime auditing our representatives.

MORTGAGE INTRODUCER NOVEMBER 2021

We also took a decision to ensure we could provide as many customer journeys as possible under one roof. This has been an evolutionary journey in many ways, but we now provide access to:  Regulated first and second charge mortgages  Regulated bridging and consumer buy to let mortgages  Sharia property finance  Protection and general insurance  Unregulated bridging and development finance  Commercial mortgages – investment and owner occupied  Balance sheet funding  Classic car finance It gives our representatives a lot of confidence that if they need to refer to us, they know the client is going to be well looked after, and they will always know first about how things are progressing. In essence, being honest, transparent, and inclusive, while underpinning all using market leading technology and systems to access the widest possible number of products and solutions, sums up what Try Financial is all about Barry Scott

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INTERVIEW

TRY FINANCIAL

d inclusivity – the Try way You’ve recently launched specialist distributor Try Specialist Finance. What is driving that growth and what makes Try different? We think now, and more so as time elapses, that mortgage market distribution is going to change, and the emphasis for brokers will be to become a genuine, general practitioner. Some feel they are that type of business already. Maybe, but there are still many that aren’t. A business model which can cover almost all aspects of distribution, if not all, and is forward looking in terms of solutions delivery and service, will become a pivotal broking hub for contracted and non-contracted distribution. Try Specialist Finance is designed specifically to be a significant piece of the Try jigsaw with this purpose, and mission in mind. Jo Baldock has just joined the business as the company’s ﬁrst business development manager. Should we expect to see more appointments coming forward? We are really excited about Jo’s appointment, and we see her very much as a standard bearer not just for Try, but for those brokers out there who want and need to see, literally, a BDM who understands what it is to be a broker and who has great market knowledge and ideas. We are looking for individuals with a similar skill set and experience profile to Jo, and have had conversations with others which may lead to further appointments later this autumn and the early part of the new year.

Aaron Scott

How do you see the mortgage market now? Is it a good time to be a broker? Yes, we do see now as being a good time to be a broker and, furthermore, it is great to see the next generation making its mark on our industry. Our broking manager, Aaron Scott is one of a fantastic young peer group across the industry who have embraced the need to provide customers with great service based on an amazingly comprehensive and well-maintained bank of market knowledge.

“In essence, being honest, transparent, and inclusive, while underpinning all using market leading technology and systems to access the widest possible number of products and solutions, sums up what Try Financial is all about” At Try Financial we deal with anything and everything, and Aaron has benefited from direct experience of many different customer situations and requirements. There is nothing standard about working at TFL! There is a caveat here for everyone, in that our market will change, as the pendulum swings back through the deployment of technology, towards direct business. The easy, standard cases might well disappear from a broker’s grasp. Those who move with the market will survive and thrive. → Martin Swann

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NOVEMBER 2021

MORTGAGE INTRODUCER

INTERVIEW

TRY FINANCIAL

The Try Financial team

Try has been developing as an appointed representative network. How has this gone so far and what are the long-term plans? The long-term plan is to grow the The Try Mortgage Network. We feel we have a considerable amount to offer, in terms of customer journeys on offer, sales tools and compliance management. The wish is to be boutique, and to ensure we keep our flat management structure where our representatives can speak to Barry Scott and myself. There is a family feel about how we run our business, but there is sharp commercial edge too. We are always looking for businesses and individuals where there would be a great fit for both parties. You are one of only a small number of businesses with HPP Permissions to offer Sharia Mortgage Advice. How important is this to your proposition and how important is it for brokers to understand Sharia mortgages? Demand for access to Sharia Property Finance, and the ability to advise, came directly from our appointed representatives themselves who had clients wanting a SPF product specifically, and were disappointed that they couldn’t advise, and instead had to hand clients directly to SPF lenders. We felt that it was something we really should try and accommodate, plus we felt there was a viable commercial opportunity to do so if we were successful obtaining an HPP permission from the FCA. We must, quite rightly, thank Gatehouse Bank for the help and guidance in making this happen. All brokers should appreciate properly the scope and

MORTGAGE INTRODUCER NOVEMBER 2021

scale of the market for SPF products which include not only Sharia or Halal mortgages but, bridging finance, buy to let mortgages and working capital or business finance products, all of which meet the criteria of Sharia Law. It is an ever developing area that all brokers should be aware of and, wherever possible, help with the customer journey. If they’re stuck, Try Financial is only too happy to help! Technology is at the forefront of the mortgage market at present. How integral is technology to Try? We have always sought out the use of very the best, well-engineered and dependable technology for our customers, particularly those providing efficiencies through minimising the rekeying of data, and offering seamless links from fact-find to application, so our sales staff and representatives would be free from unnecessary administration, allowing them to spend more time with more customers driving out the fairest outcomes. With that in mind, we have developed a great relationship with Neal Jannels and the team at One Mortgage System Ltd (OMS) whose system has been designed clearly by people who understand how a mortgage broker works. Furthermore, it allows our compliance team to work seamlessly and diligently in the background with minimal disruption to the business. We are chuffed that we have found a great combination. The application of technology solution is key, and we are constantly looking to improve what we have, and adopt new ideas we feel enhance the business and the customer experience. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Quality advice pays dividends Bob Young chief executive officer, Fleet Mortgages

f you’d like an illustration of how quickly the ‘mood music’ can change in the mortgage market, then look no further than the media perception of what was happening in the buy-to-let product space during October 2021. At the start of the month, it was possible to find a significant number of stories of the ‘landlords have never had it so good’ variety, focusing on how the ‘Mortgage rate war reaches buy-tolet landlords’, with a fixation on one lender going beneath the 1% ‘barrier’ for an individual product. These ‘best buy’ rates however tend not to last very long, and as advisers will know only too well, there are a very narrow band of landlord clients who are suitable for them in the first place, however when you can garner some mainstream media headlines then certain lenders can’t help themselves. However, just a couple of weeks later, it was possible to see a somewhat different take becoming more prevalent. ‘No more cheap debt for landlords as buy-to-let rates rise’ was the headline in the Telegraph, which might lead some landlords, or perhaps those looking at investing in property

The buy-to-let market requires specialist advice

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for the first time, to wonder what had changed so dramatically in such a short space of time. Of course, to find the real truth in this you’d need to delve slight deeper and have a more nuanced understanding of what is available in the market, who is suitable for certain products, and how to marry up need, suitability, affordability and product choice. Luckily we have you, the excellent adviser community, to provide just this service but it can leave a bitter taste in the mouth to find a raft of articles which seem to contradict each other. So, what is the situation? Well, it’s true to say there has been a slight shift from some lenders in terms of their buy-to-let product rates, and even though Bank Base Rate doesn’t tend to have very much to do, if anything, with buy-to-let funding and rate-setting in our sector, it may still have something of an influence particularly if there is a growing acceptance that the Bank of England MPC might raise BBR sooner rather than later. However, the truth of the matter is that it is the Sterling Overnight Index Average (SONIA) rate which has much more impact on pricing in the buy-to-let space than BBR. And there’s no arguing with the fact that over the past few months SONIA has been on the move upwards. Indeed, I’ve been slightly surprised that we’ve seen buy-to-let mortgage

rates as competitive as they have been in recent months. You would normally expect that when your cost of funds go up, so will your rates, but lenders have perhaps been more willing to take a hit on margin in order to secure volume. That however is only likely to be the approach for so long. And, so we are seeing, some different approaches. My expectation is that more lenders reliant on the capital markets for their funding will have to move rates upwards, while others – like Fleet – who are, for example, able to count upon a funder with significant deposits to access, will be able to keep rates keenly priced for all manner of landlord clients. There’s the rub as well for advisers active in this space. As mentioned, few buy-to-let landlords come with a truly ‘vanilla’ look and feel; indeed, the sector has become more specialist in need and provision. Landlords purchase via limited companies or partnerships, they have complex income arrangements, they have significant portfolios to take into account, they want to buy properties which are not your two-up/two-down but instead can help them maximise yield. All this requires, firstly, adviser know-how, but also a specialist lender who understand this space completely. As mentioned, these products are highly competitive – we launched a new range at the end of October which certainly fits the bill and saw us cutting rates – but they are not going to be sub1% deals, that can only be accessed by an individual on a very standard property who has 40%-plus equity. I think we all acknowledge that the buy-to-let market – particularly the one invested in by portfolio and professional landlords – tends to be much more complicated than that. Hence the need for you and hence the need for specialists like us. The market can change – and often in double-quick time – but there are always going to be opportunities for those who can provide quality, certainty and good advice. M I

NOVEMBER 2021 MORTGAGE INTRODUCER

REVIEW

BUY-TO-LET

Further positivity still to come George Gee commercial director, Foundation Home Loans

ith 2021 swiftly disappearing over the horizon and the festive season creeping up on us, there is little expectation of any significant drop in activity levels across the buy-to-let sector, and competition amongst lenders is only expected to get even more fierce as we approach 2022. So why is this? As an asset class, property continues to prove attractive for a range of people for a variety of reasons and still outperforms many other types of investment vehicle. The current BTL marketplace has once again demonstrated just how robust it can be in the face of challenging circumstances and its little wonder why such sustained levels of confidence are being exhibited across the landlord community. LANDLORD CONFIDENCE

To help demonstrate this, the latest BVA BDRC Landlord Panel research for Q3 2021 highlighted how confidence levels have carried on rising to exceed both pre-pandemic and preBrexit levels. So much so that landlord optimism has reached a five-year high for all five of the key optimism indicators. The increase is particularly marked for confidence in capital gains (+23% year-on-year) and the UK private rental sector (+21% year-on-year), which have both seen a strong uplift in confidence since Q2 2021. Landlords are also reported to be upbeat about the near-term outlook for rental yields, with 57% feeling ‘good’ or ‘very good’. However, they are said

MORTGAGE INTRODUCER

to be the least optimistic about the prospects for the wider UK Financial Market (26% feel ‘good’ or ‘very good’). Larger landlords continue to be more upbeat about the prospects for their own lettings business, although the gap has narrowed slightly when compared to Q2 figures. Optimism is also linked to behaviour, with 63% of those who have recently purchased a property feeling upbeat vs. 48% of all landlords. Additionally, 78% of those looking to expand in the next year are optimistic vs. just 26% of those looking to divest. TENANT DEMAND

These confidence levels are largely driven by rising tenant demand across the UK as the end of the stamp duty holiday, rising house prices, a lack of housing options and lingering aﬀordability issues continue to hamper the ability of some potential buyers to take their first step onto the property ladder. This was further highlighted in the research, which suggested that increasing tenant demand reached an all-time high of 57%. Three in 10 landlords reported that they have seen tenant demand ‘increase significantly’ in the last three months, with a similar proportion reporting a ‘slight increase’. Just 5% are now seeing decreasing demand, with this most common amongst those letting property to students (16%) and/or operating in Central London (15%). All regions are said to have seen a rise in landlords reporting a ‘significant increase’ in recent tenant demand. Although they are still seeing the highest levels of decreasing tenant demand, those operating in London are said to have seen a significant uptick in demand compared to the levels reported throughout the pandemic. Landlords in the south of the country (excluding London) are currently

NOVEMBER 2021

reporting the highest level of increasing tenant demand. Yield and demand remain two important contributing factors behind a variety of landlords who have added to their portfolios in recent weeks and months. When reflecting on purchase activity, the research showed that the average number of properties bought/sold remained largely unchanged, at 1.6 and 1.4 respectively. Landlords with 20+ properties continued to be most active in terms of both recent buying (24%) and selling activity (22%). PURCHASE ACTIVITY

Looking forward, an equal proportion of landlords intend to buy and sell in the next 12 months (19%). Despite the end of the stamp duty holiday, the number of landlords looking to buy has returned to the level seen at the start of the year, which were the highest recorded for four years. Landlords with 11+ properties are said to be the most likely to make changes to the size of their portfolio in the next year, with 33% looking to expand and 31% looking to divest. On a regional basis, landlords operating in the North West are most likely to be looking to purchase in the next 12 months with landlords in the East of England and Yorks and Humber most likely to intend to sell. Of those 19% of landlords who are looking to add to their portfolios, just over four in 10 landlords intend to purchase their next BTL property within a limited company structure. Those with smaller portfolios continue to be more likely to purchase as an individual, with this being the case for 40% of landlords with 1 – 10 properties vs. 24% of those with 11+ properties. It’s also interesting to see that around seven in 10 landlords plan to use a BTL mortgage to fund their next property purchase. Now this is a lot of data to digest, but it’s always so much easier to do so when it is so positive and there is every reason to expect further positivity to emerge in the next iteration of this study as the BTL sector goes from strength to strength. M I www.mortgageintroducer.com

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REVIEW

BUY-TO-LET

House purchase loans versus remortgages Paul Brett managing director, intermediaries, Landbay

he buy-to-let (BTL) sector has certainly boomed in its 25-year history with ups and downs coinciding with economic conditions and government interventions. We can split these 25 years into two parts using 2015 as the before and after year. Up to 2014 the BTL market was driven by house purchase loans compared to remortgages but after 2015 that flipped with remortgaging becoming more dominant. To put that into context, UK Finance BTL data began in 2002 so from then until 2014, more than half (55%) of BTL lending was house purchase with remortgaging at 44% and ‘other’ at 1%. From 2015 to 2020, house purchase accounted for one third of the market (34%) and remortgaging almost two thirds (64%) with 2% other BTL lending.

number of BTL mortgage transactions in the UK has been higher than house purchase but there have been two notable monthly exceptions. These two months saw a huge jump in house purchase lending and the reason in both cases was stamp duty land tax. March 2016 was the highest month on record with 29,100 BTL mortgages for house purchase as buyers rushed to beat the new 3% stamp duty surcharge for owning second properties. This compares to 16,000 remortgage completions, which stayed a record high until October 2018. The second highest month on record was June 2021 as 15,200 BTL house purchase buyers scrambled to meet the stamp duty holiday deadline, introduced due to Covid and the lockdowns. Remortgaging cases stood at 13,800. LANDBAY’S LENDING

Looking at Landbay’s mortgage book over the past two years, pre-Covid and up to August 2020, our remortgaging submissions accounted for 53% of lending, slightly ahead of house purchase at 47%.

Nevertheless, we are writing a substantially higher amount of house purchase loans than the general trend in the market, which I think is because we specialise in complex BTL lending. There are fewer lenders catering for clients borrowing through traded limited companies, for example, or first-time landlords buying HMOs. From September 2020 to May 2021, the picture changed for us as there were largely more house purchase loans than remortgaging. I put this down to the influence of the stamp duty holiday with landlords keen to buy and make a saving on the tax. Since June we have mainly gone back to more remortgaging than house purchase. It just goes to show what influence government intervention has on people’s decisions to buy property when the tax rules are changed. MORE BUSINESS FOR BROKERS

Remortgaging will continue to be a large slice of brokers business as there are a substantial number of maturities due this year and next. In the wider market, there is £38.9bn of mortgages maturing in October but the figure is even higher for January 2022 at £39.6bn, according to research firm CACI. There will be ample opportunity for brokers to make advance contact with their clients whose mortgages are due for renewal in both the residential and BTL markets. M I

WHAT CHANGED IN 2015?

Various government announcements were made in 2015 regarding future changes to BTL to deliberately discourage landlords in favour of firsttime buyers. Tax changes, affordability stress tests, introduction of portfolio landlords and more complex rules, to name a few. Inevitably, some landlords sold up, especially those who were parttime, but it also discouraged property investment to some extent, hence less house purchase activity. However, there were still thousands of landlords needing to remortgage so that kept the BTL market buoyant. Every month since January 2015, the

MORTGAGE INTRODUCER

There are a substantial number of maturities due this year and next

NOVEMBER 2021

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REVIEW

BUY-TO-LET

Buy-to-let will remain strong Cat Armstrong mortgage club director, Dynamo for Intermediaries

nother month has flown by since my last article and there appears to be little sign of any sustained lull in buy-to-let activity before the inevitable tailing off over the Christmas period (yes, I said it!). Throughout the BTL market, we continue to see a host of data confirm much of what we are experiencing as a business. Although it’s important to constantly monitor the performance of the sector and its many working parts. One of the most positive headlines to emerge in recent days was that tenant demand hit an all-time high in Q3. This was the headline which emerged from Paragon Bank which outlined that almost seven in 10 (69%) landlords said they had seen demand grow in Q3 – the record high – with 36% describing this happening to a ‘significant’ level. The South of England was suggested to be driving most of this activity. A net increase of 79% was reported by landlords in the South West and 74% in the South East, excluding London, with this metric shrinking to 59% in the North East. In Central London, 54% of landlords saw demand increase,

with 16% registering falling demand, the highest of all regions in the country. However, Paragon noted that the script has been flipped since Q3 2020, when 16% of landlords in Central London saw higher demand and 58% saw lower demand. As outlined by Paragon managing director Richard Rowntree, seasonal demand has added to already high levels of tenant demand and, when combined with a shortage of property in certain parts of the PRS, this is leading to rental inflation. And it’s up to lenders, with the support of the intermediary market, to deliver products and service to help landlords meet a diverse range of tenant needs. SLIGHT FALL

Moving onto yields, the seventh iteration of Fleet Mortgages’ buy-to-let rental barometer highlighted slight falls in rental yields compared to the same quarter last year. However, Fleet point out that in 2020 this covered the first full three-month period out of lockdown where yields spiked in certain parts of the country. The specialist lender pointed to a more recent comparison between Q3 and Q2 this year, with total rental yield on residential buyto-let properties across England & Wales up to 6.3%, a 0.7% increase on the previous three-month period. In addition, seven out of 10 regions – all

Yields are robust and healthy for the vast majority of landlords across the UK

MORTGAGE INTRODUCER NOVEMBER 2021

except East Anglia, South West and South East (which has the same rental yield figure as Q2) – saw an increase on the Q2 2021 figures. Once again, the North East of England posted the top rental yield regional figure for the fifth quarter running, improving again to 8.3% (up from 8% in Q2 this year), with the North West climbing into second place with 7.7% (up from 6.9%), Yorkshire & Humberside came in third with 7.3% (up from 7.2%), and Wales also registered a 7.3% yield (up from 6.3%). The slight fall in year-on-year rental yields may not appear to be the most positive news but – as outlined in the barometer – it’s important to maintain some kind of perspective and highlight just how robust and healthy these yields are for the vast majority of landlords across the UK. Yield and demand are obvious factors for any landlord but there are other considerations to take into account when ensuring that individual BTL investments are a success. According to Hodge, more than half (53%) of landlords said getting the right tenant in place was their top consideration, while 42% identified finding a good property manager as paying a major role. The research, which asked around 100 portfolio landlords and brokers for their views on the BTL market, also found that being able to re-let properties quickly was high up on landlords’ priority lists, with 37% citing this as a key concern. Landlords have faced many challenges over the years, including many from a regulatory and tax standpoint, and the BTL marketplace has evolved greatly over this time. However, the fundamentals largely remain the same and these revolve around tenant demand, yield, tenant quality and the successful management of these properties. Thankfully, it’s a combination which the vast majority of landlords are successfully managing and this is why the BTL market will continue to attract strong levels of business for the foreseeable future. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Student life is good for buy-to-let Jane Simpson managing director, TBMC

s a specialist buy-to-let broker, TBMC is dedicated to helping brokers and landlords find the best mortgage solutions across a wide range of different property and tenant types. So, it is important that we maintain a comprehensive knowledge about specialist subsectors of lending in the buy-to-let marketplace and understand the pros and cons of particular property investment choices. Recently, Paragon Bank published an interesting report on student letting which highlighted some of the reasons this area of buy-to-let is popular with the UK’s landlord community. RENTAL YIELDS AND LOCATION

One of the key benefits of renting to students is that rental yields can be higher than average, particularly when properties are let to multiple tenants generating more rental income. According to the Paragon report 79% of landlords said that rental yields were a factor that made student lets appealing. It also showed that last year in Q3 2020, the overall mean rental yield was 6.6% for a student property portfolio, compared with 5.6% for a non-student portfolio. University locations are clearly a hot spot for good rental yields and those with a single university and student population below 25,000 seem to fair best. The top yielding university location was Swansea with a rental yield of 9.56%, followed by Hull (8.68%) and Plymouth (8.41%). Landlords looking to invest in student lets can research different www.mortgageintroducer.com

and mortgage products for buy-to-let investors to choose from. ADVANTAGES OF AN HMO:

university locations to identify those where property is more affordable and demand is high, to increase their chances of a good return on investment. Perhaps surprisingly and despite the financial potential, only 13% of landlords currently let their properties to students which suggests that there could be an untapped opportunity for savvy property investors. Although COVID-19 has had a short-term impact on the demand for student accommodation with online

“University locations are clearly a hot spot for good rental yields and those with a single university and student population below 25,000 seem to fair best. The top yielding university location was Swansea with a rental yield of 9.56% followed by Hull (8.68%) and Plymouth (8.41%)” learning and living at home being more commonplace during the pandemic, applications for university places increased in 2021. And as students return to campuses, landlords should be able to rely on a steady and predictable demand for student digs. HMOS

Houses in Multiple Occupation (HMOs) are traditionally used for student lets and are a popular property choice with buy-to-let investors. The availability of finance for HMO properties has also improved and there is now a wide choice of lenders

 Potential of greater return on investment and higher rental yield generated from multiple tenants.  Lower risk of rental voids – if one tenant moves out the remaining rooms are still occupied.  High demand – living in shared accommodation is a popular choice with a wide variety of tenants including students and professional workers.  Less exposure to arrears because if one tenant fails to pay their rent, other tenants are still paying. DISADVANTAGES OF AN HMO:

 Legislation – there is significant legal onus on HMO landlords e.g. meeting licencing requirements, implementing fire safety measures, providing electrical and gas certificates, and maintaining communal areas.  Maintenance costs may be higher with a larger property accommodating multiple tenants.  Increased administration involved in complying to HMO property regulations and managing multiple tenancies. HMO CONSIDERATIONS

There are also a number of factors that come into consideration when handing HMO mortgage cases: Assured Shorthold Tenancies (ASTs) - Check the number of ASTs in place with the tenants. Some HMO mortgage lenders accept multiple ASTs and others will only accept one. Facilities - Most HMO mortgage lenders will only expect to see one kitchen and one living room in an HMO. If the property has more shared facilities, you may need to approach a specialist buy-to-let lender. No. of rooms and size - HMO mortgage lenders have specific criteria on how many bedrooms they will accept in the property. Checking minimum room sizes is also important as new HMO regulations stipulate a minimum of 6.51 square metres for an adult bedroom. M I

NOVEMBER 2021 MORTGAGE INTRODUCER

REVIEW

BUY-TO-LET

Learning from the past Richard Rowntree managing director of mortgages, Paragon

conomists have warned of the risk of the UK entering a period of ‘stagflation’ for some time but the panic buying of fuel, soaring energy prices and supply shortages of essential everyday items have raised the profile of the issue amongst the media and general public. The fear is that the price of labour and commodities will continue to increase as demand outstrips supply, squeezing already strained household budgets. This has led to comparisons with the 1970s, when attempts by policymakers to halt a recession were viewed as over stimulation of markets and blamed for destabilising prices and wages. This time around it is a little diﬀerent because while ONS figures show that the furlough scheme has cost taxpayer £69bn, raising to £97bn when you include self-employed grants, it is likely to have suppressed unemployment and any deep scarring of the economy to some degree. Despite this, and with the Bank of England already accused by the House of Lords as being ‘addicted’ to

printing money due to their £895bn quantitative easing programme, Governor Andrew Bailey seems keen to avoid making the same mistakes; it is very likely that by the time you read this, the first hike in a long time will have increased the base interest rate from the historically low 0.1%. Of course, any base rate increase would impact mortgage rates, something foretold by substantial rises in swap rates - the six-month low of 0.77% in August almost doubling to 1.36% at the time of writing. This has led to questions about whether a rise in the cost of borrowing could cause some investors to exit the private rented sector. The result could be fewer properties available to let, which in turn, could reduce the aﬀordability of rented property. I don’t see this happening in any significant numbers, however, and it is important to look at the wider context. With the market starting cool after the highs of the Stamp Duty holiday, we’ve seen mortgage product availability return to pre-pandemic levels. Competition has driven down the cost of borrowing in many areas of the mortgage market with sub-1% rates in the mainstream residential market the result. The buy-to-let market hasn’t been far behind. This means that rates rise from an extremely low base. Unlike in the case

History has shown buy-to-let investors the correct way to select their investments

MORTGAGE INTRODUCER

NOVEMBER 2021

of the stagflation we saw in the 70s, when interest rates climbed to double figures, we are unlikely to see rates rise to a point where those looking to modify their portfolios are priced out of the market. And while the cost of borrowing is undoubtably an important factor for investors, cheapest isn’t always best. This is particularly true in the specialist buy-to-let market where the added complexity of some cases requires more time and expertise. Specialist buy-to-let lending is also subject to tighter regulation, with more stringent underwriting and generally lower loan-to-value lending, introduced after the global financial crisis, acting as protection for both consumers and lenders, as well as the wider economy. We also should recognise that many members of the increasingly professional landlord base will remember the economic shock of 2008 and be better prepared as a result. Landlord leveraging is lower than it was in the past and when we compare the proportion of mortgages more than three months in arrears across the buyto-let and owner occupier tenures we consistently see far fewer, around half, of PRS investors failing to make regular repayments. In part, this can be attributed to the strong and relatively stable demand for rented property that has been seen for decades, with evidence to suggest it will only grow further. Recent Paragon research has highlighted that the proportion of landlords reporting increasing tenant demand is at an all-time high. Alongside this, the proportion of landlords who said that they feel optimistic about a range of diﬀerent PRS components continues to rise, exceeding pre-Brexit and prepandemic levels to hit a five-year high recently. Of course, this could change, but for me it suggests that those making a living from letting have learned from the past and are resisting making investment decisions based on conjecture alone. M I www.mortgageintroducer.com

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BELONGING

together

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paymentshieldadvisers.co.uk/be-ready For intermediary use only. Paymentshield and the Shield logo are registered trademarks of Paymentshield Limited. Authorised and regulated by the Financial Conduct Authority. © Paymentshield Limited 2021. 11/21 02152

REVIEW

PROTECTION

Mortgage protection is not the only fruit… Mike Allison head of protection, Paradigm Mortgage Services

he phrase ‘low-hanging fruit’ generally refers to easy-toaccomplish tasks or easy-tosolve problems in a particular situation. It’s a cliché often uttered in business settings that are widely used and occasionally abused. Tasks described as ‘low-hanging fruit’ are sometimes described as inconsequential to the larger challenges. Much like the easy but low priority items on your to-do list, they might be quick for you to dispatch. Time management experts have been known to suggest that focusing on the more time-consuming tasks will yield the greatest results in the longer term. It could therefore be argued that in terms of greatest reward, business professionals should avoid a preoccupation with what they deem low-hanging fruit and concentrate on the higher-yielding opportunities for a number of reasons. As in many areas of our industry, strict business principles do not always apply within financial services and sometimes there has to be the happy medium when it comes to analysing risk and reward. Most mortgage advisers will be well aware of the scenario I am painting, especially when it comes to product transfers versus remortgaging versus new business prospecting. I am sure many have tried to analyse the commercial benefits of focusing on one over the other and then once that analysis of the economics has been done, blend in customer service, relationship management, opportunity cost and of course regulatory responsibility to the melting pot to try www.mortgageintroducer.com

and decide where best to forage and in what ratios. One of the areas to also consider in this mélange is cross-selling opportunities and future potential sales. One of the reasons we see some of the stand-out performers in the valuation of businesses is based around just that potential. Bringing an FS example of that to the discussion, Monzo Bank is barely four years old. It boasts around four million customers, has racked up significant losses (£130m this year) and yet has a valuation of around £2bn. Like it’s forerunners, Google, Facebook et al it relies on future opportunities as opposed to the here and now including a considerable number via cross sales.

“Strict business principles do not always apply within financial services. There has to be the happy medium when it comes to analysing risk and reward” Back to our world and our own customer expectations of our service to them. There are many arguments to suggest the cross-sale opportunities in mortgages link quite clearly to life assurance and GI. Whether that should always be the case at the point of the mortgage sale is a diﬀerent argument and may change in the future as the regulator takes a closer consumer focus. The existence of the opportunity however is in little doubt. Traditionally however the ‘simple’ sale or ‘low hanging’ one has been mortgage protection – a decreasing term to link to the mortgage amount and term. Indeed, many a compliance person has argued in the past that is the only clear need at that time. Broadening this out however and looking at future opportunities as

opposed to the here and now allows us to look into other areas of support for clients who are on a journey to acquire an asset they will one day own outright. In many instances that will be the greatest asset they own now that final salary pensions are a rarity. Should they reach that happy state of the deeds being locked in the kitchen drawer as opposed to deposited with the lender that asset can then potentially give rise to another problem – Inheritance Tax (IHT). Once the tax of the landed gentry now sits in the sights of many a homeowner and more importantly the beneficiaries of the estate of that homeowner. Recent figures from HMRC show the government revenue from IHT between April and August was 35% more than for the same period a year earlier. The main reasons for the rise in IHT receipts are threefold. Firstly, the nil rate band of £325,000 - the asset amount an individual has free before they are charged IHT at 40% - has not risen since 2009. Secondly, estate values have risen in the last year mainly due to strong investment returns and significant growth in property values. Finally, the majority of wealth in the UK is owned by the over-60s which is the age bracket where sadly Covid has resulted in more deaths than usual. Many of these customers of advisers will have had the opportunity to discuss ways to avoid the tax but may not have thought it relevant at the time. We are led to believe that both the nil rate band and residence nil rate will remain frozen at existing levels until April 2026, at £325,000 and £175,000 respectively, meaning many families are already receiving increased IHT bills due to rising property and share prices and more will going forwards. The simple mortgage protection policy may be the lowest hanging fruit on the tree but there are other examples of how life assurance can help oﬀset tax liabilities not too much further up that tree. And it could well be that long-term benefits in terms of customer satisfaction and intergenerational planning benefits come back in volumes thereby adding value to the advisory practice itself. M I

NOVEMBER 2021

MORTGAGE INTRODUCER

REVIEW

PROTECTION

Remo protection opportunities Paul Yates product strategy director, iPipeline

ortgages and protection go together like ham and eggs (vegan options are available). That’s the theory anyhow. Demand in the housing market has a direct impact upon and correlation with demand for protection products – whether that’s life, critical illness or income protection. One would expect a graph over time to show two complimentary curves, rising and falling alongside one another, as more mortgage conversations result in more protection conversations – and therefore sales. The benefits of this link between mortgages and protection are numerous. For many clients, the only interaction they have with an adviser of any type will surround a mortgage. As such, it’s vital that advisers make the most of the opportunity and ensure that their client, their family and home are covered in the event of any unexpected health events. A TIDAL WAVE OF REMORTGAGES

So, whilst some form of normality begins to settle on the housing market (and life in general), after a stamp duty holiday induced haze of activity, there is another challenge, and huge opportunity, on the horizon. There is almost £80bn worth of mortgages maturing in October and January alone. Great news for brokers, and their clients who can secure more expert advice to help keep costs down and aid their finances. Just under half of the people remortgaging increase their loan amounts

(LMS data). Coming out of Covid there will also be significant changes in their work, financial and personal circumstances. This is also a time to cover the full range of products available if not covered or taken up previously. For most clients this is an opportunity to build long-term financial security into their lives; not just secure a new fixed rate deal. This is an undertaking too important for brokers to pass up. Equally, the increasing focus placed on advisers through the FCA’s Consumer Duty work, has changed the narrative around protection. Do advisers still see protection advice as a choice or is it now their duty (at least) to have the ‘protection conversation’? Over the course of thousands of forthcoming re-mortgage conversations, brokers have an opportunity to set a personal challenge around these questions and better develop the role that protection advice plays in their business over the longterm. GETTING THE SUPPORT NEEDED TO DRIVE THIS CHANGE

For some mortgage advisers, protection is an area of planning they are less familiar with, less confident with, or both. So, to make the most of this opportunity there may be some work to do or some knowledge gaps to fill. The good news is that there are several sources of useful training and information, which can get brokers up to speed, and quickly. First and perhaps most topically, the recent Income Protection Awareness Week (IPAW) organised and curated by the Income Protection Task Force (IPTF), included training and development content aimed solely at mortgage advisers. Sure, it represents a single pillar of protection planning, but protecting income is a good place to start.

MORTGAGE INTRODUCER NOVEMBER 2021

Equally, there is a wealth of valuable training on protection available for advisers of all specialisms, including specialist training and webinars run by providers. For example, LV= run a regular series of sessions, including some bespoke to mortgage advisers. Indeed, at iPipeline we engage thousands of advisers in protection via our own training and development webinars, covering a range of different protection focused topics. ENGAGING CUSTOMERS AND CREATING OPPORTUNITIES

For those brokers who are comfortable with protection and have already integrated such discussions into their advice process, it’s good to know that there are also tools available to help further engage customers in this crucial aspect of financial planning. There are technology solutions that can help reduce the time taken to research and select the most appropriate products – including the added value services. Market experts Protection Guru power a range of research services and product features reports which can help advisers compare products and stay on top of changes. Another important tech solution, CI Expert, offers advisers critical illness policy definitions and analysis to aid their decision-making. There are also tools that can help you engage with customers and demonstrate the likelihood of making a claim during the re-mortgaged term and show how affordable solutions are. ACCEPT THE CHALLENGE

Mortgage and protection advice should go hand in hand, but too often this opportunity to secure financial futures goes missing. The forthcoming wave of remortgages present as an opportunity for all advisers to challenge themselves and ask what role protection advice should play in their business. For those needing extra confidence, help is at hand; the tools to gain knowledge, confidence and client engagement exist. The time is now. M I www.mortgageintroducer.com

REVIEW

GENERAL INSURANCE

Want to build client loyalty? then listen up James Watson sales director, Paymentshield

ecent industry stats are pointing towards a buoyant market for financial advisers, whether that’s IBIS World Figures forecasting a 6% growth in revenue for UK advisers by the end of 2022 or the latest Iress Mortgage Efficiency Survey reporting that 90% of applications are coming from the intermediary channels. That buoyancy was certainly felt at Paymentshield’s ‘GI: Be Stronger Together’ conference in September but if the past 18 months have taught us anything it is to always be prepared for the unexpected. The performance of the property market has been remarkable. Whilst a huge chunk of this success is down to the stamp duty holiday, advisers showed great resilience with their ability to turn to GI and hold on to their clients, identifying client loyalty as the key to a resilient advisory practice. The value of client loyalty and how businesses and advisers can rise to this challenge was one of the key sessions at our September conference. All panellists, experts from Sky, Real Life, and Trustpilot, agreed that the key to retaining clients lies in the power of listening. Transactional approaches revolving around ‘selling and buying’ a service must be abandoned in favour of holistic models placing listening at the basis of the advisory process. Lenders and insurers have a part to play in this by reducing the admin burden and making transactions as easy and frictionless as possible to enable advisers to spend more consultancy time with clients. So how can financial advisers

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practically increase client loyalty via active listening? Allowing the client to drive the conversation is the first step to displaying empathy and understanding the customer’s vulnerabilities, aspirations, and values. The greater the understanding an adviser can gather, the more tailored offer they can make to the client. Avoiding the blanket approach sets the ground for deeper connections, mutual trust, and loyalty. At Paymentshield, we have brought customer empathy to the fore during the past eighteen months by developing a Quality Conversation framework and educating our staff to put themselves in the customer’s shoes. Ultimately,

“Nurturing a relationship with a client must be seen as a long-term endeavour continuing well beyond the initial consultations. Financial advisers can play a vital role in supporting the client throughout their life milestones and differentiate themselves by providing a compelling advantage over the competition and GI needs to be a key part of that ongoing conversation” this not only benefits the customer by providing them with personalised support, but also the adviser and their businesses. Of course, the listening process does not cease at the end of the conversation with the client but continues into the adviser’s reflection moment. This second step requires the adviser to utilise the data gathered during the

conversation and transform it into a tailored offer, where the customer’s personal circumstances are taken into account and reflected in the adviser’s recommendations. Finally, nurturing a relationship with a client must be seen as a long-term endeavour continuing well beyond the initial consultations. Financial advisers can play a vital role in supporting the client throughout their life milestones and differentiate themselves by providing a compelling advantage over the competition and GI needs to be a key part of that ongoing conversation. They can provide a real feeling of assistance and protection during critical moments of the clients’ lives, such as purchasing a property, changing profession, welcoming a new-born into the family, or receiving windfall inheritance to only name a few. Clients also need to know that they can turn to their financial adviser in their hour of need by being there for a client to listen and support them through the four D’s: death, disaster, divorce, and debt. By being able to listen to clients and support them in navigating the financial implications of these major life milestones, the client-adviser relationship is moving away from a transactional to a truly consultative one. While clients undergo exceptional life circumstances, advisers are stepping in to lighten the burden and deliver financial assistance in a time of real need. The feeling of protection and understanding is something the aggregators will never be able to replicate. As such, in the current economic climate, where client retention has become at once increasingly necessary and difficult, financial advisers must embrace a holistic approach that places listening at their heart of their consultations. Encouraging clients to lead the conversation, evaluating their needs, and assisting them throughout their life achievements and tribulations are necessary steps that can provide advisers with a competitive edge ultimately helping them develop a customer for a lifetime not just a one-off purchase. M I

NOVEMBER 2021 MORTGAGE INTRODUCER

REVIEW

EQUITY RELEASE

Conveyancing issues in a buoyant market Claire Barker managing director, Equilaw

s the number of cases involving complex or nonstandard issues begin to outweigh those of a more routine nature and unprecedented fluctuations in supply and demand continue to push completion times on purchase transactions involving equity release to new thresholds, so too have solicitors within the sector struggled to manage the expectations of clients. Most solicitors will tell you that a representative or practice can only go as fast as the slowest link in a given chain, and this places an enormous reliance on each component to provide the information and paperwork needed to move transactions at a desirable pace. However, even in cases when these conditions are met, the ability to progress can often be undermined or compromised by the backlogs that form at periods of high demand and by sudden shifts in prevailing trends and circumstances. For example, many legal firms specialising in equity release work have experienced a sharp rise in enquiries from clients looking to purchase properties using ER products over the past 12 months, with overall demand (which has ranged from those wanting to move closer to family members or who require more living space to those who wish to help dependents get on the property ladder) being further inflamed by the reduction in Stamp Duty Land Tax rates. However, while transactions of this nature are typically complicated by the presence of the ER lender and the need to liaise between two sets of solicitors, the demand for routine services in

the run-up to the SDLT holiday deadline was extraordinarily high, with lengthy backlogs pushing completions turnarounds to an average time of six to eight weeks. In addition, the shift towards Type 2 & 3 (or non-standard) cases in recent months has also been a defining factor in lengthening typical completion times, with numbers far exceeding those previously experienced. Indeed, a prime example of these kinds of issues has revolved around the ownership of solar panels and the implications that these can have for ER applications. DIRECT IMPACT

This may sound rather innocuous, but if the panels have been leased from a provider in exchange for cheaper bills, then they will remain the property of that provider and directly impact on a lender’s ability to grant a new mortgage. Moreover, if the lease is not compliant with CML regulations, then a representing solicitor will need to liaise, where possible, between the panel provider and ER lender to agree a deed of variation, which is then registered with the Land Registry. However, if the terms of the deed prove unsatisfactory to the lender, then the client may need to find a new source of funding to proceed, thereby creating significant delays. Likewise, if the panels are being paid for as part of a hire purchase agreement, then the lender will usually require the outstanding amount to be settled as part of the loan, thereby eating into client funds, undermining calculations and prompting further delays. It’s an exacting business to be sure and one which has contributed significantly to the lengthening of completion times over the past few months. Another common cause of delay relates to cases in which small parcels of land have been sold as a

MORTGAGE INTRODUCER NOVEMBER 2021

separate transaction to the main plot but have not been updated with the Land Registry, thereby depriving lenders of the information needed to proceed with an application. To resolve this issue therefore, the client is obliged to prove that they own the land by providing the deeds to the property, which are then checked by a solicitor to ensure that there are no boundary discrepancies or other issues. The solicitor will also need to search the Land Charges register in order to discount any third-party interest in the property as this can impact on a lender’s decision to grant an application. Once this is completed however and the loan is confirmed, the solicitor’s findings are submitted to the Land Registry, with average turnaround periods taking up to five months to complete and clients being charged an additional fee for the data to be registered on the registrar’s electronic database. So, more time, more money... And this is assuming that the title deeds have not been lost or are partially missing, as this will require the solicitor to reconstitute the title using whatever documentary evidence and information the client can provide to prove ownership of the property and satisfy the Land Registry. Again, more time etc. These examples should give a reasonable idea of the kind of problems being faced by specialist solicitors at the present time and the impact that they continue to have on turnarounds. Nevertheless, these can be eased by brokers involving solicitors in cases from the earliest possible date and by “front loading” case files with any unusual or relevant information at the point of instruction, thereby allowing representatives to take the necessary steps to minimise or to factor-in the likelihood of delays. It’s an obvious step of course, but one which isn’t adhered to as often as we would like, and while that’s not meant as a criticism of brokers, the fact remains that greater awareness and reaction to these factors could be instrumental in providing better service standards and quicker turnaround rates. Because ultimately, forewarned is forearmed. M I www.mortgageintroducer.com

REVIEW

EQUITY RELEASE

The ﬂexibility of equity release Alice Watson Xxxxxxxxxx head of marketing and communications, xxxxxxxxxxxxxxxx, Canada Life xxxxxxxxxxxxxxxx

ome finance and the ability to free up equity from your home is a way for families to realise their goals without having to move from a home they love. However, it can also be used as a way to help other family members on to the ladder, facilitate care costs or deal with the last remaining mortgage payments. It is this financial flexibility that we can see from our own data. Since January 2021, the most popular reason for loan was to pay off an existing mortgage, accounting for almost half of Canada Life’s applications (46%).

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This was followed by making home improvements which add extra value and enjoyment to the property, which accounted for 34% of loans, compared to 38% in 2020. Debt consolidation also remains popular with one in five using equity release in this way. Customers have also been using equity release to purchase a new property, with 15% of loans used in this way in the first nine months of the year. This compares to 10% of loans used in this way in 2020. This flexibility of purpose has been essential over the last 18 months as families across the country have been faced with the financial stresses of adult children moving back home, elderly relatives moving in or cuts to income either through furlough or redundancy. Furlough in particular can be a

prolonged stress on family finances. In fact, Canada Life research found that 44% of furloughed adults had turned to credit card borrowing during the pandemic and over a third (34%) had either remortgaged their property, or considered doing so, in order to boost their pandemic finances. Property wealth is playing an increasingly important role in financial planning as the level of equity available reaches these unprecedented levels. Using the Halifax house price data as a guide, Canada Life was able to calculate that the country has over £740bn in available equity. Considering this boomtime for property prices, advisers should be ready to answer any questions clients may have around equity release and the huge range of flexibility and choice MI these products can offer.

NOVEMBER 2021

MORTGAGE INTRODUCER

REVIEW

EQUITY RELEASE

Time to evaluate Xxxxxxxxxx Stuart Wilson xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx CEO, Air Group

t seems somewhat staggering to say this already, but we are only a month and a half away from the end of the year. 2021 in some ways has felt like a relentless rollercoaster of ups and downs, but it has ‘gone’ incredibly quickly, no doubt fuelled by the strong levels of business that I hope you have been dealing with and completing. As we approach the end of the year, it’s understandable – and indeed necessary – to be thinking about what the next 12 months will bring and, perhaps for those of us working within the later life lending market, to be thinking about a sense of new beginnings and renewal, and what we need to put in place to help drive this market forward. REACHING POTENTIAL

At Air Group we have been thinking about our sector, and how we can help develop it to reach its potential, and what might be required to be able to do this. This led us to conduct some recent research amongst 400 advisers – those already active in the market and those who were looking to be – to ask their views on how we take this market forward, what we can do as a business to support this, and the overall action that will be required. Three key themes emerged – rebranding, re-engagement and re-education – which were not simply focused on helping advisers but also helping to develop the later life market for consumers. Helping their understanding of the wider array of options available and educating them about the benefits of advice, what they might wish to access in terms of adviser experience/qualifications/ authorisation, and the different routes this might lead them down.

Fundamentally, it has become clear that, as a sector we can’t simply keep on referring to equity release as the only option available to later life borrowers/ homeowners. Not least because it’s fundamentally not true anyway. The research clearly highlighted the need to move away from this ‘single product solution’ and to talk much more widely about later life lending options, which of course includes equity release but also means retirement interest-only (RIO) mortgages or mainstream products with a higher maximum borrower age. Allied with this is accessibility and a belief that this has to be at the heart of a re-engagement with both advisers and

“Some advisers only offer equity release solutions. Some only offer mainstream product options. Some offer both but may not be overly confident in one particular area and some would rather steer clear of it all together even though they might be seeing far more older borrower demand than they have ever seen before” consumers. It’s fair to say, we simply won’t get the level of accessibility or engagement we want if we constrain ourselves to providing equity release ‘solutions’ and nothing else. There are a number of sides to this of course. Some advisers only offer equity release solutions. Some only offer mainstream product options. Some offer both but may not be overly confident in one particular area and some would rather steer clear of it all together even though they might be seeing far more older borrower demand than they have ever seen before. That is a circle which is difficult to

MORTGAGE INTRODUCER NOVEMBER 2021

square, but one way we can do it is with a re-education of advisers in terms of the demand that’s there and how it might be dealt with. Again, having a focus on ‘later life’ rather than one specific product area has to be an over-riding goal in the advice space. At present, the silos within our sector are so rigid that we can’t ultimately be sure if the customer is getting the right solution unless the adviser is a ‘later life specialist’ rather than one merely focused on equity release or the mainstream options. Now, don’t get me wrong, this is as much a result of our regulatory structure as it is of advisers choosing to go down this path. In fact, you might say that advisers have been left with very little option, but fundamentally we will get better consumer outcomes if we have advisers willing and able to advise and recommend across all later life options, not just equity release or RIO/ mainstream products. In that sense, education and support has to focus on all those areas, with businesses like ourselves committed to helping later life advisers bring their propositions to market, and at the same time, educating the older consumer to seek out those advisers who can ‘do it all’ and then some. THE RIGHT DIRECTION

Admittedly, there has to be a recognition that such a goal is not going to come about overnight, but we’re also aware that many advisory firms are already moving in this direction anyway. Progress is being made as the industry seeks a solution to the somewhat disparate nature of the later life market. Overall, this should be a time for a re-evaluation of the later life sector and delivering an all-encompassing, interconnected offering with advisers able to cover all its constituent parts. By doing this we’ll get both our market and the MI consumer to a far better place. www.mortgageintroducer.com

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THE OUTLAW

THE MONTH THAT WAS

All Blacks: No longer invincible

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

MORTGAGE INTRODUCER NOVEMBER 2021

his monthly diatribe of mine normally nails over a dozen judiciously chosen miscreants and marvels. But this month I only have a handful as the FCA are once again confounding me in depth. Most mortgage brokers amongst readers will either know a local IFA or better still, might already be co-authorised as one. Over the years there has almost been an umbilical cord linking the two, even if my own view is that many IFAs look down their www.mortgageintroducer.com

faux-intellectual noses at mortgage brokers! For they can occasionally patronise them as being the sector’s great unwashed (despite the fact that their own sector’s negligences have seen their own brethren’s FSCS liabilities far out-deluge those of mortgage brokers!). Well, what an autumn it’s been for you brokers. Wherein rumours have it that one rosy and crimson mainstream lender nailed over £ 1bn in remortgage completions on November 1 alone! So, there can be few brokers who won’t be flush with cash this Christmas. We had been told by industry Svengalis such as Simply Biz’s Martin Reynolds that October would be a near record month for Product Transfers and the Baggie Man didn’t disappoint. And with January 2022 (and indeed April of 2022) also looking like gargantuan months for cessations, brokers should be well placed to continue their fine run of this year year in to next. That’s a facile prediction, I guess. But such is the season now upon us that it’s time for some year- end reflections and accompanying those some perennially inaccurate predictions for next year, so let’s get swiftly on to these. 2021 was an extraordinary year for property purchases, our lazy Prime Minister, and planet Earth. All three of these enjoyed an incredible sequence of winning months, but also some scares and anxious moments. Taking each in turn, the property market is already showing signs of catching its breath and the inevitable rate rises may take some of the froth off the purchase market. The Stamp Duty boon was a game enhancer and a recent piece of research advocated that a permanent extension of the stamp duty threshold would provide a fiscal surplus of £139m a year. Not that our beleaguered PM read it. For as for Boris, his continued complacency and arrogance knows no ends, with the Owen Paterson debacle revealing his naked incompetence, rampant cronyism and perfidious buffoonery. We could use so many metaphors for him, but the most apposite is surely that fish rot from the head. To use an often used sporting parallel, he and his government are starting to stink the place out. Rishi Sunak just needs to keep his dignity and patience, as this PM will falter sooner or later and fall on his own vain sword, though we may have to wait until 2023 or 2024 for that. As for planet Earth, COP26 achieved far less than it should have, but my hunch is

→

The Queen: Could she stand down?

that (not unlike the Diversity and Inclusivity movements amongst employers?) we are now past the tipping point where heads of state and company executives will support the cause more fully... not necessarily because they all believe in it unequivocally, but because they can’t risk being seen not to. Some things didn’t change much in 2021, and one of these was the unfaltering regularity with which the likes of Habito and Purple Bricks continue to flout the advertising standards guidelines. Habito was of course the latest one with a wrap on the knuckles from the ASA. This noisy firm should be re-named as Clickbait Incorporated as that appears to be its primary function (in last week’s Sunday Times it ran a plug for 40-year fixed rate mortgages.... I mean → NOVEMBER 2021 MORTGAGE INTRODUCER

THE OUTLAW

THE MONTH THAT WAS

Martin Reynolds: On the money

come on! Who is going to buy one of those?). Yet hot on its heels comes another start -up lender, Perenna. It will seemingly focus on 30year deals. In the words of one Dad’s Army stalwart.... these strategies are DOOMED! Not unlike the All Blacks’ patronising Haka, which itself should now be consigned to the trash bin

along with the kiwi team’s former air of invincibility. Which brings us finally to some further doom-mongering and misplaced clairvoyancy for 2022 and ten totally random forecasts; 1. Barclays will continue to be the sector’s marmite lender. 2. The Queen may well stand down. 3. Prince Charles will continue to be a political and social embarrassment. 4. House prices will edge up further, between 2 and 3%, and base rate by 1%. 5. This sleaze-infested government will get trounced at two key bi- elections. 6. A now irrelevant Arsene Wenger will finally STFU about World Cups every 2 years. 7. Ole Gunnar Solksjaar will be gone by Easter. 8. The Duke of York will avoid the clink but further uncomfortable truths may out. 9. Rumours of procuration fees rising will prove unfounded. And best of all, the market size will be circa £20bn more than what we saw in the last year before COVID struck. Now that really is a Christmas present we daren’t have dreamed of 18 months ago! I’ll be seeing you, MI The O. Boris Johnson: His arrogance knows no ends

MORTGAGE INTRODUCER NOVEMBER 2021

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LATER LIFE LENDING

TECHNOLOGY

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JORDAN ASHFORD

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Commercial Director matt@mortgageintroducer.com 07525 456 869

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Advertising Sales Executive tolu@mortgageintroducer.com 07551 208 989

INTERVIEW

BRIGHTSTAR

New horizons W

alking through Brightstar’s Billericay headquarters, a wall-mounted motif depicts a decade’s worth of key milestones and achievements. History is clearly important here, but the constellation design – inspired by Project Genesis and space exploration – is also synonymous with mapping new paths into the unknown. Since its formation in 2011, Brightstar has remained at the forefront of the evolution of the specialist finance market. As it celebrates its 10-year anniversary, the business looks back at the events of the past decade, and forward to what frontiers will be explored in the next. STARS ALIGN Brightstar has grown exponentially, achieving triple digit growth per annum over the first five years alone, and now reporting the same level of business in a week that it did in the first year of its existence. Rob Jupp, chief executive officer at Brightstar, says: “I can’t believe it’s been 10 years. When we started, the goal was quite simply to try and survive the first year – that was it. There was not a master plan to create a brand that was the market leader of specialist finance. If we could survive 2011, I was reasonably confident that we’d be OK.” Rob Jupp says that, while the specialist lending market did not exist in the same form it does now, he could see the growing demand for this type of product, which in the decade since has become a thriving sector in its own right. During that time, Brightstar has fought to be at the forefront of new developments, and has shifted from being an entrepreneurial small business, to gaining the size and traction to take on a more corporate approach. This, Rob Jupp explains, meant putting in risk and governance structures, which at the time was not a prerequisite for specialist distributors or packagers, and which necessitated a considerable investment. In April 2016, Brightstar launched Sirius Property Finance, an important move in expanding its presence in the key London market. “We wanted to really take on and challenge London,” Jupp says. “To be very much a disturber in the market. So that’s why we created Sirius, because we felt that many of the London brokerages were very patriarchal and a little bit complacent. “So we created Sirius to challenge that, and over the course of the last five years it has increased its market

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share massively, and is now a serious player there.” As well as having 120 industry awards under its belt to date, leading movements such as the Women in Finance Charter and the Mortgage Sleep Out campaign, and gaining record scores in the Sunday Times’ Best Small Company to work for list, October 2021 saw Brightstar reach £5bn in completions. Bradley Moore, managing director of Brightstar, says: “I am of course immensely proud of the things we have achieved over the last 10 years, our success as a business, and our teams and individuals. “Most important of all, though, is that you build on what you have created, learn from the mistakes and think bigger, achieve bigger and never ever get complacent.” CULTURE AND VALUES Key to this success is the people at the centre of the business, and Brightstar takes a serious and considered approach to its internal culture. “The investment we made from outset was that people were always at the centre of our universe,” says Jupp. “10 years later, people remain absolutely at the centre of what we do.”

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INTERVIEW

BRIGHTSTAR

Jessica Bird sits down with Brightstar as it hits its 10-year milestone, to discuss how the business has grown over the years, and what the next decade might bring Clare Jupp, group director of people development, was brought onto the team in order to further this commitment and take it to the next level. She says: “The values that we share are, quite simply, that we love what we do. It’s really imperative that everybody here feels passionate about what they’re doing, because that means we give the very best service that we can give.” By creating a positive internal culture, Clare Jupp says that this then has an effect on the service clients receive, making it more likely they will come back again, and refer back to Brightstar in the future. This is also mirrored in the way the business works with others in the market, she adds: “We believe passionately in partnership – working closely with brokers, introduces and lenders. “We talk about the Brightstar family, and we do truly mean that – working together can achieve great things.” The business has had the same core values and people-centric approach since it was first founded, although these have become more articulated and codified over the years. The collaborative approach not only helps nurture and progress talent throughout the organisation, which From L to R: William Lloyd, Clare Jupp, Rob Jupp and Bradley Moore

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Clare Jupp points to as an important element, but also has a role in ensuring creativity and innovation all the way to the top. “We are all teachers and we are all learners,” she explains. “Which ties in with the idea of evolving, you’ve got to always see that there are new things to learn. That’s a massive part of our of our culture.” Rob Jupp adds that to be a thought leader, a business must be willing to work alongside others, sharing best practices to change and improve the market. He says: “One of the things that we’re really happy to be is collaborative – we’re really happy to share the work we do here, because we think it will improve our world a little bit.” This culture aims to build loyalty and commitment, as well as reinforcing the business’ reputation and growing its ability to help a diverse range of customers. LIFE LESSONS Looking back over the first 10 years, Rob Jupp says that one of the key lessons has been the importance of not standing still. “If we don’t evolve, then we will not continue to be the market leader,” he explains. “The obsession with self improvement is there every hour and every day. “Where’s the opportunity? Where is where is the growth potential? How can we continue to be different? How can we continue to challenge this market and to make it better for the overall benefit of the consumer?” Moore agrees: “As a team we are very honest about what works and what doesn’t, and quick to make change if we feel that it’s appropriate, which is a major strength. For example, Brightstar pioneered the introduction of dedicated product lines with focused advisers. Moore says: “It became quite clear early on that the need to be true specialists was required, and we made a fundamental change to the way in which we transacted with our brokers and clients, moving from multi-product advisers to single product lines. This continues to serve us well today.” Clare Jupp adds: “The whole thing now is about leading the way and shaping the future of UK specialist finance. Rob is always keen for us to be trailblazing innovators, rather than imitators.” This focus on constantly pushing boundaries and innovating comes with risks, however. Rob Jupp explains that it is important to accept that mistakes will happen, even though Brightstar sets great store in researching a space before it makes a jump. → NOVEMBER 2021 MORTGAGE INTRODUCER

INTERVIEW

BRIGHTSTAR This ability to make mistakes and learn from them is also part of what makes for a strong management team, says William Lloyd-Hayward, group chief operating officer at Brightstar. “Each individual is naturally going to make their own mistakes, and have their own failings,” he explains. “As a combined unit we outweigh each other when those things happen. “We’ve all got strengths and weaknesses, and this is testament to where we are now that we’ve got such a close relationship, that when one of us is having a failing on something, it’s picked up by someone else – it’s about learning and encouraging, and that’s where we make better decisions.” Brightstar’s success so far, and foundation for future progress, is therefore founded on the idea of taking risks and remaining at the forefront of the market. This is not always an easy position, Rob Jupp explains: “I’m not afraid to make a bold decision. I’m absolutely expecting to swim against any tide that’s coming my way, because that’s just evolution that’s what an entrepreneur does. “I’m also not afraid occasionally go under the water and feel like I’m struggling. I’m sure we’ll continue to make mistakes.” STRENGTH IN DIFFERENCE The Brightstar ethos of benefitting from different ways of thinking, of learning from and supporting one another, and of pushing forward to create positive change, goes beyond the evolution of specialist finance products. The business is also at the forefront of important cultural changes, including the need to improve diversity and inclusion in the industry. Clare Jupp says: “People talk a lot about the strength of diversity in the boardroom, but I think we really epitomise that. We are such different individuals, but that is what brings strength, because we all look at things in a in a different way.” Diversity and inclusion starts with recruitment, as Brightstar aims to get the right range of people in at ground level and provide ample and equal opportunities for development and progression. It continues through the business’ commitment to projects like the Women in Finance Charter, and its internal focus on flexibility and wellbeing, to ensure work is shaped around individuals’ lives, rather than the other way round. This is all underpinned by a holistic understanding that inclusion is not a tick-box exercise, and is not something that can be improved overnight. Clare Jupp says: “We look at diversity and inclusion in its broadest sense. Some people might just see that in terms of protected characteristics, which is important, but in the wider sense we look for people that we feel have got something to add, something different. “We embrace difference. One of the biggest strengths is that we are such a diverse team.”

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COPING WITH COVID Brightstar was well equipped to handle the upheaval of the COVID-19 pandemic. It was among the first to go remote, before lockdown had been properly implemented in the UK. The existing culture meant that management was not concerned about whether people could be trusted to do their jobs without oversight, and instead concentrated on employees’ wellbeing and mental health, as well as working hard to maintain customer service during a challenging and unpredictable time. “There was the personal point, in terms of how it was impacting family and friends,” says Lloyd-Hayward. “Then we were trying to deal with the immediate priorities for the business – such as keeping staff safe. Then we had to make sure that at that point in the future, the business could be ready for people to come back. “We were making very quick decisions, and that’s where it goes back to the investment we’ve made for 10 years in our people – when the chips were down we had all the right people in the right positions to make those decisions.” With an investment in a new telephony system, which Brightstar brought forward just in time, and people working hard across the business, service was not seen to suffer. “From day one, no one noticed a service difference, there was no surge in complaints, no surge in customer service issues,” says Lloyd-Hayward. Brightstar also continued with its ethos of collaboration and sharing best practice, even with competitors, during the pandemic. Lloyd-Hayward says: “We were sharing information, and as much as we’ve been reactive to product changes, we’ve been proactive with customers. Everyone went back to the trenches and back to their priorities.” Rob Jupp adds: “We put the most of that work on our website, so our competitors could actually go and get that information that we had spent days researching. It’s just the right thing to do. “This is what thought leadership is all about. It’s not just doing it because it’s commercially advantageous, but because it is the right thing to do as a decent human being.” Although the experience of the pandemic showed Brightstar that it was possible to work entirely remotely, which is reassuring in the face of an uncertain future, it also reminded the business of the value of a collaborative space. Clare Jupp says: “We’ve got the capacity for all of that, but what it’s taught us is that we are a family and we do want and need to work together. “So, whilst we do facilitate requests for different types of working, that would not be our favoured way of doing things.” For example, she adds, when it comes to the progression of women and those from minority groups, www.mortgageintroducer.com

INTERVIEW

BRIGHTSTAR the importance of physically being ‘in the room’ cannot be overstated. TECH ENABLED Technology has been a considerable area of investment for Brightstar over the years, and Rob Jupp suggests that this is an important aspect to get right, as it can pose “a real opportunity and a threat, depending on how you embrace it.” Lloyd-Hayward says: “70% of the financial activity we do is done on mobile devices. It’s not done in banks or on desktops any more. So, moving us onto an Android and iOS operating system is obviously a priority.” However, he warns that there is a limit: “As a specialist, technology is the enabler and it’s improving the offering. It’s not a replacement for people, and I think firms should be cautious. “People are the heart of the business, but they’ll be better at doing their jobs because of technology. Technology won’t be better at doing their job.” Part of this approach is about making the journey for the broker or client less laborious, sometimes in ways they are not even aware of, as well as streamlining the way Brightstar works with networks and mortgage clubs. “It reinforces the point about making the whole customer service piece ingrained in the business, and it is a big investment,” Lloyd-Hayward continues. “We’ve invested heavily in the last two and a half years in internal systems that no one sees, so that we are one of the quickest players in the industry.” For example, Brightstar’s advanced telephony, which allows it to track key words and create data sheets from every call, identifying issues before they become problems, is part of a proactive, rather than reactive approach. Lloyd-Hayward points out that, as the lenders in the market are all at different stages in their journey to adopting technology, Brightstar’s approach is not to wait, but to forge a path ahead and therefore be ready when they catch up. “So, we are perfectly set up for the next decade,” Rob Jupp adds. “Having made that huge and often arduous financial investment in the infrastructure, we are able to continue with our exponential growth.” NEW HORIZONS Brightstar is, by its nature, a business that is open to considering the next opportunity or frontier. For example, having been approached on the subject several times over the years, there is the potential of either becoming a lender, or being acquired by one. Fitting with the idea that bold exploration should be preceded by careful consideration, Rob Jupp says this is still only a talking point, and the right partner would have to come along first. Beyond this, the business will face the next decade with the same attitude of innovation and continual www.mortgageintroducer.com

improvement with which it navigated the last. Rob Jupp says: “We start each year the way we finished the last, by looking at the business and saying, how can we be better? How can we be stronger? What changes do we need to make? How can we retain and value our people and continue to be the market leader?” He adds that, as a business that has always been open to change, seeing uncertainty and evolution on the horizon is not a cause for concern. Among the market shifts expected, Rob Jupp suggests that at the moment, the specialist market is “purely scratching at the surface” in terms of the proportion of deals and clients currently underserved by the high street. He says: “At the moment, the vast majority of clients that require specialist mortgages are not able to access them, and that in itself is both a challenge and an opportunity in equal measure. “For us, that’s about creating new products that the market hasn’t had before, and working with lenders to identify the opportunities.” Moore agrees: “Clearly in the current climate, specialist finance is more relevant than ever, which means more opportunity for new lenders – and hopefully more tailoring of products to meet the needs and demands of those borrowers undeserved by the mainstream market, following an unprecedented period. “We will always aim to drive innovation for the benefit of our brokers and borrowers, working closely with our lender partners.” Other trends gaining traction include the growing green agenda, continued changes to the UK’s relationship with the high street, the potential boost to brownfield development following the recent Budget and the challenges that brings, and the mounting need for an overhaul of planning laws. Through all of this, Brightstar’s goal will be to innovate, challenge and disrupt, helping brokers get switched on to new opportunities. Looking forward long-term, to where the business might be at its next decade milestone, the importance of legacy and succession comes into play. Moore says: “We have grown the sales force and our distribution exponentially and will continue to drive forward, bringing young people into the business and through the ranks.” Rob Jupp adds: “I’m just amazed at how ambitious and aggressive we remain after all these years. The passion and determination to absolutely tear this market up hasn’t gone away “We’ve got lots of younger people that have got the years ahead of them, and the energy and passion to be able to not just take on the business, but actually move it to the next level.” Lloyd-Hayward concludes: “It’s been 10 years of setting the bar high, and in the next 10 years the bar will stay high and we will keep continuing to challenge ourselves.” M I NOVEMBER 2021 MORTGAGE INTRODUCER

PANEL

NEW BUILD

BUILDING FOR THE FUTURE Mortgage Introducer and e.surv brought together a panel of experts take a closer look at the housing shortage and the key role new-builds will play in making up the numbers

here is a chronic under-supply of housing in England with the government estimating that some 345,000 new homes per annum are needed to meet and clear the backlog in demand. However, in 2019/2020 just 244,000 homes were built - a whopping 101,000 short of what is required. In fairness that’s around a 1% uplift on the amount built the previous year but as anyone can see it is still light years off where it should be. And it looks like the country is still some way from being in a position to hit these numbers. Material and labour prices are on the up, there’s the COVID hangover plus the impact of the green agenda currently sweeping through Westminster. The brunt of many of these issues, and more, have yet to be fully felt but are clearly already causing problems across the housing sector and beyond. It should be remembered that housing need manifests itself in a variety of ways, such as increased levels of overcrowding, acute affordability issues, more young people living with their parents for longer periods, impaired labour mobility resulting in businesses finding it difficult to recruit and retain staff, and increased levels of homelessness. But what can be done to improve the levels of housing stock and get people the homes they need? We brought a panel of experts together to discuss

MORTGAGE INTRODUCER NOVEMBER 2021

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NEW BUILD the issues and ask if the new build market can hit the lofty targets set by the government and required by all. THE MARKET AT PRESENT Whilst some parts of the British economy have stagnated or stalled over the past 20 months under the burden of COVID and Brexit the property market had been experiencing something of a renaissance. And David O’Leary, policy director, Home Builders Federation (HBF), says the new build market, and the wider construction sector, has been one of the beneficiaries of these strong market conditions. “It’s well documented that the entire housing market has been very buoyant for over a year now and the new build component is no exception,” says O’Leary. “But I don’t think we would have expected it to be as buoyant as it has been in our wildest dreams - especially after the changes to Help to Buy.” Those changes to the Help to Buy equity loan, which

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was first introduced in 2013, saw the scheme become exclusively available to first-time buyers of new builds. It had previously been open to all new build buyers who did not own another property. “We were expecting to see a reduction in demand following the changes to the scheme, but that just hasn’t happened,” adds O’Leary. However, one thing that is being seen in the market is a reduction in the number of active new build sites. This is masked somewhat by sales rates per site, the metric that most house builders pay attention to, being at levels that were last seen in the early 2000’s. “There are fewer, and fewer sites now and there has been a reluctance to open new sites. “This was to be expected somewhat due to the changes to Help to Buy but it could also signal a feathering of the throttle of investment in light of upcoming uncertainty. The exact reasons remain to be seen.” →

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PANEL

NEW BUILD

“One of the main issues aﬀecting the second hand market is a shortage of stock. I think this has caused a lot of pent-up demand to then turn to the new build market” JAMES GINLEY James Ginley, technical director, e.surv Chartered Surveyors, points to the second hand market as another potential factor that could be fuelling the high demand in the new build sector. Indeed, hard-to-sell homes are being snapped up by the hundred as Britain’s booming property market maintains a year-long breakneck sales record. Ultra-low interest rates, the demand for more spacious properties and pent-up savings are all helping to create a buying boom. “One of the main issues affecting the second hand market is a shortage of stock. I think this has caused a lot of pent-up demand to then turn to the new build market,” says Ginley. Ginley’s point has been illustrated by the latest figures from the Royal Institute of Chartered Surveyors. It found that despite a 10% rise in the number of new enquiries, estate agents only have an average of 37 properties on their books. Some, 20% of contributors to the research from RICS also reported a fall in the number of new properties being listed for sale. And the impact of this pent-up demand and lack of supply is kicking up some interesting features on local levels according to Ginley. “There are places where there is now a second hand premium on properties as opposed to the new build premium we have seen in the past,” he says. “The stock levels just can’t keep up. It’s created oddities around pricing. “Historically the second hand market has been constantly repricing, this is a feature we are now seeing in the new build market. “The challenge for valuers is to keep track of pricing

“There are 95% deals out there, but no one is interested because they have too much deposit behind them” ANDREW FOWLER

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NOVEMBER 2021

in such a frenetic set of circumstances. In localised areas that can become quite extreme.” And demand does not look like it is going to die down any time soon. Vikki Jefferies, proposition director at PRIMIS, said new build desks within the network were exceedingly busy but confessed to having some trepidation about the medium-term outlook. “We’ve all had a great time and things are looking positive for now but it’s where things will be when we get to the end of the second half of 2022 that concerns me,” she says. Richard Goldthorpe, new build director at RSC New Homes, agrees. His business has also experienced incredibly strong demand for new build - the problem is, he says, that there just isn’t enough of it. “We’ve noticed incredibly high demand and our lead numbers are higher than previous years. “The problem is going to be stock availability. We have a market full of people who have saved and are ready to buy or move. “We are already forward sold 12 months in advance and we are now being asked to pre-qualify people for homes that will be built in 2024!” Andrew Fowler, senior new build consultant, Grange Mortgages, is also seeing people looking to buy years in advance. He also pointed to the availability of 95% new build mortgages compared to the take up of such products - which he and Goldthorpe say has been negligible - as a sign that there are serious buyers out there ready to snap up available new build homes. “There are 95% deals out there, but no one is interested because they have too much deposit behind them.” As Scott Howitt, sales director at Chartwell Mortgage Services, concludes: “Supply and demand is an issue. There aren’t a lot of new builds out there and developers are being cautious. Pricing is a huge issue. We are going to hit an interesting point with valuations and new builds in the future.” CHALLENGES FOR THE SECTOR And pricing is likely to become increasingly challenging for surveyors and developers alike. The latest state of trade survey by the Federation of Master Builders (FMB) found that more than eight in 10 SME builders have had to delay work as they struggled to access the materials needed to complete jobs. A further 8% said they were forced to cancel jobs altogether due to material difficulties. Whilst 93% said they were expecting material price rises to continue into the fourth quarter. The figures come on the back of a year of difficulties accessing basic building materials including steel, timber and cement. Increased demand for the supplies following the www.mortgageintroducer.com

PANEL

NEW BUILD coronavirus lockdowns, and issues including a blockage of the Suez Canal and a partial port closure in China, contributed to the material issues. All of which has been further complicated by a widespread skills shortage. “Supply and labour shortages are certainly going to be a key feature moving forward,” says Ginley. “Properties are going to be more difficult to build moving forward in the face of changing demands from both consumers and regulators. “This is at a time when builders need to be simplifying costs.

“Supply and demand is an issue. There aren’t a lot of new builds out there and developers are being cautious. Pricing is a huge issue” SCOTT HOWITT

“For instance, putting gas boilers into properties is a pretty straight forward process. Fitting a heat pump is complicated - retrofitting one is even more so. Jefferies agrees: “There are lots of factors that are pushing the prices up of materials. Some of the costs facing builders are astonishing. “Even on jobs like an extension you can be looking at quotes being up as much as a third from what they were last year. “There is clearly an issue and, as James says, the environmental requirements add another level of complexity.” And it’s not just larger builders who are being hit by the supply shortages and regulatory changes. One area that often sneaks under the radar is the selfbuild market - however these cost increases are clearly going to have a significant impact on such borrowers. “It’s going to have a massive impact on the self-build market,” says Ginley. “More established developers have supply chains that should be able to resist the problem for longer. SME builders will be feeling the impact heavily however - especially self builders. “If they are facing these issues mid-build the challenges must be horrendous.” Howitt said that whilst builders are clearly under the cosh on the supply chain and skills front it’s not all doom and gloom with many never having had so much work available to them. He says: “It’s not a bad industry to be in at the moment. I get that it’s difficult at the moment, but builders will just reprice. “The bottom line is that the consumer will pay whatever it costs to buy the house they want. It’s then www.mortgageintroducer.com

down to the lender to decide if that property is suitable security for the loan.” GOING GREEN Homes account for more than a fifth of the UK’s total CO2 emissions and despite ‘going green’ being talked about for years it finally seems to be gaining some traction. In England in 2019, about 15 million homes - or 60% of the total stock - were below EPC band C. And last month the government committed to upgrading “as many homes as possible” to achieve EPC band C by 2035 “where cost-effective, practical and affordable”. Is this new green agenda here to stay? Howitt thinks so: “In the past it’s felt a bit wishy washy but it’s now on the top of the agenda and feels like everyone is talking about it. “Literally everyone is talking about it.” And Ginley agrees but says that he’s unsure if lenders have fully grasped the materiality in terms of valuations. He says: “We are now seeing the very material cost difference between owning a home that is efficient and one that is not. If you have modern systems, then that is materially different when it comes to ownership costs.” Howitt reckons that these costs will become a real point of interest for lenders moving forward. “I think the cost of running a property will become more of a factor than it ever has been before,” he says. O’Leary concludes “There is no way around it. The cost of running a home has to be properly factored into the finance decisions. “There is a huge step change coming in regulation and the cost of building homes. We need help with this as some of these decisions are not going to be popular with consumers to start with.” CHANGING OF THE GUARD The issues facing the housing market now fall on Michael Gove, the new Secretary of State for the Department for Levelling Up, Housing and Communities (DLUHC). The Tory heavyweight has been tasked with solving the housing crisis in his latest role as well as overseeing long promised planning reforms and navigating the post-Grenfell building safety bill. →

“We’ve all had a great time and things are looking positive for now but it’s where things will be when we get to the end of the second half of 2022 that concerns me” VIKKI JEFFRIES NOVEMBER 2021 MORTGAGE INTRODUCER

PANEL

NEW BUILD

“Properties are going to be more diﬃcult to build moving forward in the face of changing demands from both consumers and regulators” JAMES GINLEY

Gove, the latest in a long line of housing secretaries, will also be expected to shape a new strategy to meet the government’s 300,000-a-year housing target (the 345,000 to clear the backlog is not expected to be hit) - a feat that not one of his predecessors in the role has been able to achieve. Ginley points out that the lack of tenure for Housing Secretaries is one thing that has held back the government from achieving their long-term goals for the market. “There’s been a lack of consistency in housing ministers and that has created problems. The cladding issue remains a hot topic that is unresolved. “The challenge facing Michael Gove is a great one but it is by no means a new one. “We need some more clarity on sustainability. There has been a piecemeal approach so far and it just isn’t joined up.” One area that shows the lack of joined-up thinking is the heat pump grants set to be offered by the government. The scheme will see homeowners in England and Wales offered subsidies of £5,000 from next April to help them replace gas boilers with low carbon heat pumps. The grants are part of the government’s £3.9bn plan to reduce carbon emissions caused by heating homes and other buildings. However, the Renewable Heat Incentive (RHI) which launched in April 2014 can provide £7,000 for heat pump projects. People who join the scheme and stick to its rules receive quarterly payments for seven years for the amount of clean, green renewable heat it’s estimated their system produces. The scheme closes in March 2022. Ginley adds: “The grant scheme coming in is materially worse than the current scheme on offer. “There is a lot of talk at the moment but in the housing space it just doesn’t really feel very joined up. That is the key challenge for the housing minister.” MODERN METHODS OF CONSTRUCTION One of the ways that Gove and the market could look at improving efficiency and the speed of delivering

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NOVEMBER 2021

new homes is by embracing modern methods of construction (MMC). MMC is a process which focuses on off-site construction techniques, such as mass production and factory assembly, as alternatives to traditional building. It’s a process which has been described as a way ‘... to produce more, better quality homes in less time’. “Culturally there is an opportunity here for us to shift the dial,” says Ginley. “The way people are living is changing. Styles of living will change, and it will be interesting to see how this is factored in to building. “Modern methods of construction may be able to help with design functionality for this new way of living. “It can be simple, effective and environmentally friendly.” O’Leary said that members of the HBF had already started to engage with MMC He adds: “Nearly all the large home builders are doing something in this space to varying degrees. “We’ve been a bit hampered in the past few years by some very high-profile examples of MMC being focussed on compete modular homes. “All of that looked snazzy and attractive to new housing ministers but it hasn’t always panned out as the silver bullet that some minsters have seen it to be. “However, everyone is now involved in this and at some point the market will coalesce around some forms of MMC for different types of build. We are building 250,000 homes a year through traditional methods. If we can expand the MMC output it could help hit the government’s targets.” THE FUTURE Overall, with new building regulations, additional costs, taxes, levies and ongoing issues, the building of the homes the country requires looks to be a challenging task. With a new housing minister in place and increasing environmental demands on developers both large and small alike, the new build market will have to adapt to continue to thrive despite the most buoyant property market has seen in decades. Time will tell if the sector is up to the job. M I

“We are building 250,000 homes a year through traditional methods. If we can expand the MMC output it could help hit the government’s targets.” DAVID O’LEARY

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LOAN INTRODUCER

SPOTLIGHT

Expanding the Loan Introducer chats to James Rainbird, managing director, Pink Pig Loans about branding, fees and the future for the market Your business has an interesting name – where does that come from? When I was setting up the business 16 years ago, it was becoming fashionable to have company names which were a bit out there and I felt as we were going to be operating in the business-to-business market we needed a name to make us stand out. Back in the day, NatWest used a pig in its marketing – many of us will remember having a NatWest piggy bank. One day, I was on the M4 and brainstorming names but assumed someone would have snapped up Pink Pig. However, when I pulled over to get some reception on the BlackBerry I found that it was free, so it all went from there. It’s still fair to say people don’t forget the name. As a business, we are currently going through a rebranding process; I feel that the word ‘loans’ doesn’t accurately represent what we do as a business today and so we will reveal new branding in the new year. Don’t worry, the pig will still be there in the background. You predominantly package second charge loans, how is the sector performing? Historically, I would have agreed with that characterisation but we’ve diversified and now are equally in the bridging and development finance space, as well as specialist mortgage market. As far as seconds are concerned, we’re finding the market very buoyant. In 16 years of trading, our last quarter consisted of repeated record months and this month is also looking incredibly strong. However, it’s down to sheer hard work. We’re finding that every deal has to be looked at in greater detail and they are taking longer to fund. How do you feel about fees in the second-charge market, are some too high? While I’m fully aware of the arguments surrounding fees,

MORTGAGE INTRODUCER NOVEMBER 2021

James Rainbird

www.mortgageintroducer.com

SECOND OPINION

e brand I would say there are a number of factors to consider and it’s not black and white. Essentially, I don’t think fees are too high. The costs of running a business today are far higher than they ever have been. Processing a regulated transaction in 2021 involves significant costs in Professional Indemnity (PI), regulatory fees and overheads. We perform our due diligence on cases right from the outset in order to manage expectations of all parties and that comes at a cost, but one we think is well worth it. Who are you seeing demand from at the moment? We’ve seen a marked spike in buy-to-let (BTL) demand, largely from professional landlords. In seconds, there is plenty of demand from clients who are in a five-year fix with their first-charge and need to raise additional funds – a very popular scenario. There are second charge lenders who will look at different multiples, offering more flexibility on income than in the first charge market. For example, if a borrower can’t secure a further advance or remortgage because they don’t have two to three years of favourable accounts, some lenders will look at the last six-12 months or work off an accountant’s reference.

BRIDGING FINANCE? We’re the Experts. Regulated & Unregulated loans available. Rates from 0.43%. Loans from £30,000. Interest rolled/retained or Simon Mules serviced. commercial director, Optimum Credit

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What does the future hold for the market? Diversification is the way forward. We’re going to see a degree of turbulence following the pandemic: jobs will be lost, income will be hit, interest rates are likely to rise. If a packager just has one area of expertise then they will find it hard. That’s why we’re involved in bridging and development and specialist lending. We’re also looking to add equity release to our proposition in the new year. I would like to see lenders exerting tighter control over distribution. Far too often we come across situations where the borrower has been told they can secure a low rate but it never comes to fruition because that rate was never viable for the borrower in their circumstances. From a consumer perspective, they need the right advice and the most suitable product they can get access to. If lenders took a closer eye at their panels and culled them accordingly then borrowers and the market more widely would benefit. M I www.mortgageintroducer.com

Get in touch today Marie Grundy

01709 321 665 sales director, West One Loans www.nortonbrokerservices.co.uk

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

NOVEMBER 2021 MORTGAGE INTRODUCER

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SECOND CHARGE

Second-charges for renovation Steve Brilus chief executive officer,, Evolution Money

he issue of improving our homes is a hot topic at the moment, not least because of the government’s launch of new grants to encourage more homeowners to install heat pumps as a more eco-friendly option than traditional gas boilers. Thousands of homeowners have taken on home improvement projects in recent months, and not just in order to improve the energy efficiency of their properties. Many have targeted ways to revamp their homes to make them more suitable for their needs for the longterm, for example, by adding a new bedroom if they have a growing family, or introducing a permanent workspace if they look likely to continue to work from home in the future. These sorts of home improvements make a lot of sense if you don’t fancy the rigmarole of having to actually move home and can instead tweak your existing home so it’s more appropriate. But it does inevitably raise the question of where the funds to cover that work are going to come from. REMORTGAGING TO RAISE FUNDS

For many advisers, the first port of call with a client who wants to raise funds will be to investigate their remortgaging options. That may be sticking with the current lender and asking for a further advance or moving to a new lender for a higher amount, releasing some of the equity built up in the property in order to unlock the funding needed. This can be a tempting option if the client is sat on their lender’s standard variable rate (SVR), as there will be no early repayment charges to worry about. Let’s be honest though, how often does that happen? In all likelihood, the client will have at least a year or www.mortgageintroducer.com

so left on their existing deal, meaning potentially substantial exit fees to include in the calculations. That’s certainly not the only concern either. The client will also have to give up their existing rate and face the risk of moving to a higher interest rate, on a larger loan. That could be particularly painful if they are already enjoying a really competitive rate. What’s more, by borrowing a larger amount there is a very real danger that the loan will slip into a higher LTV band. That brings with it the probability of again seeing the interest rate on the overall loan increase to a less attractive level. Between the interest rate jump, the LTV band increase and the money spent on exit charges, suddenly the remortgage route looks far from appealing. THE SECOND-CHARGE ALTERNATIVE

There is another option though, and it’s one that advisers are becoming far more familiar with - second-charge mortgages. Through a second-charge, the client can raise the funds they need to carry out that project, but without having to touch their existing home loan in any way. A second-charge mortgage is raised against the equity held in the property. As a result, the original mortgage is untouched - it’s simply a question of how much equity the client has built up in their home. And given the rate at which house prices have increased over the last 12 months - an increase of 10.6% in the 12 months to the end of August, according to the latest data from the Office for National Statistics - thousands of homeowners will have seen their equity levels swell of late. Because the second-charge route doesn’t impact the existing mortgage, it avoids all of those downsides. The client won’t have to worry about exit fees, for example, simply the cost of arranging the second-charge. Similarly, there will be no concerns about having to give up that cracking

rate which their mortgage adviser identified in the first place, nor any issues over falling onto a less attractive deal due to an LTV change. The client can carry on with their original mortgage in place but dedicate the funds from the second-charge towards their refurbishment plans. BECOMING MORE COMFORTABLE WITH SECOND-CHARGE

There was a time when relatively few advisers dealt with second-charge mortgages, but thankfully over the last few years that has changed dramatically. What’s more, the market is performing strongly at the moment. The latest figures from the Finance & Leasing Association show that in August the value of new secondcharge business reached £95m, with the number of loan agreements hitting 2,314. That’s an increase of 118% and 103% respectively on the same

“Momentum in the seconds market shows that these products are here to stay” point in 2020. It’s not just a one-off either - seemingly every month, the figures reported by the FLA are up substantially on last year. It’s clear that the market is bouncing back from the difficulties of the pandemic, and delivering the products that people need. Of course, not all advisers will feel comfortable dealing with secondcharge deals, even now. Which is why it’s so welcome that there are so many master brokers, or lenders like Evolution Money, who can take on the advice responsibility and ensure clients receive the highest standards of guidance when finding the loans they need. The momentum in the second-charge market shows that these products are here to stay and will continue to serve as an excellent alternative to remortgaging. M I

NOVEMBER 2021 MORTGAGE INTRODUCER

SPECIALIST FINANCE INTRODUCER

INTERVIEW

Above and beyond Jessica Bird speaks to Kim McGinley of Vibe Specialist Finance about the business’ core values, plans for growth, and expectations for the future

ibe Specialist Finance launched in summer 2018, when managing director Kim McGinley decided to use her 12 years’ experience working for specialist banks, and her strong relationships in the sector, to set up her own brokerage. McGinley says: “I started with no client base at all, having come from a lender background. So, my goal initially was just to shout about Vibe as much as possible and make those connections. I really committed to that at the beginning and to just grew it from there.” McGinley started the business on her own at home, gradually building it out by nurturing relationships, and eventually establishing an office in a commercial unit nearby. Building her own business from scratch meant that McGinley was able to offer flexibility, and thereby access a wider talent pool, for example working parents who might not have been able to fit life around restrictive office-based work. “I’ve got children, and I didn’t want to be dictated to as to when to work, how to work, and when I had to make sacrifices like not being there for certain family events,” McGinley explains. “That was then coupled with wanting to use my experience. That’s why I’ve got such a family aspect to the business, because of how I started it, because I wanted more time with my children. I’ve taken that through with me into the brand.” Vibe Specialist Finance has now grown to a team of eight, four of whom were recruited during the pandemic, and McGinley’s growth plans certainly do not stop there. Most recently, the business has launched a regulated mortgage and protection division, to allow it to cater for an even wider range of clients as part of the next stage of its evolution and expansion. “With this we can be more of a one-stop shop,” McGinley says. “We were passing away so many residential leads, and we haven’t looked back from that, so I’ve got two people working on the regulated side, and we’re really looking to grow that side, including protection as well, but without deterring away from the fact that the specialist arm of the business is truly where we’ve been born from.”

MORTGAGE INTRODUCER NOVEMBER 2021

Kim McGinley

PREVIOUS With more her belt a n d brokers, the gaps and set Finance mind. She t h a t many

EXPERIENCE than a decade under on the lender side, numerous positive relationships with McGinley saw where were in the market, up Vibe Specialist with this in explains: “I’m grateful I’ve got so g o o d

relationships, but if I’m honest, whilst there are some amazing and fantastic brokers out there, I got to see a side where, equally, there weren’t. If I’m honest, it’s a disservice to their clients, and seeing what they were charging, I just felt like I could add something a little bit different and really utilise my experience.” It is also her experience of the inner workings of lenders that helps McGinley provide a valuable service to clients. “It’s just understanding the dynamics in a lender, and what key information is needed upfront before a decision gets made,” she explains. Having an understanding of what questions might crop up along the way, and providing the information proactively, is an important part of Vibe Specialist Finance’s proposition, both in terms of the questions asked of clients, and the information presented to lenders. This does not just mean providing heaps of information, McGinley adds, but also ensuring it is easy for an underwriter to grasp from the outset. Having positive relationships with decision-makers within the lending community is particularly important in the specialist space, McGinley explains, where transactions tend to need more support and attention. www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER

INTERVIEW CORE VALUES Having recently taken the time to delve into the core values that underpin the business, both in terms of its internal culture and its external approach to service clients, McGinley says these boil down to five key points.  Deliver together  Above and beyond  Believe in balance  Communicate openly and often  Dare to be brave These values encompass the importance of working as a team, working hard but balancing this with life outside of the office, communicating both internally and externally, including airing issues in a constructive way, and going outside of the norm in order to learn and improve. “We are not an average broker,” McGinley explains. “We don’t have an average broker mindset. We always want to be the best and do the best we can.” These values are not simply touted in an abstract way, but play into people’s performance metrics, and are reflected throughout the business. LESSONS FROM COVID Being a younger, more agile business, McGinley says Vibe Specialist Finance was well placed to weather some of the challenges when COVID-19 hit the UK in 2020. For example, already being cloud-based and flexible, the upheaval of leaving the office was relatively minimal. However, she adds that being a smaller business, at a relatively early point in its journey to establish itself, meant that the pandemic was very difficult at times. This is something McGinley says should be part of a business’ narrative. She says: “We’ve got a lot of people shouting about the good times, and I think you do need to do that, and I love the fact that there’s so many brokers out there that have absolutely flown in this period, but I think equally it’s quite good to be honest as well. I’ve never worked as hard as I have these last 12 months, ever in my life.” In terms of lessons learned during this period, McGinley says it has become increasingly clear how important it is to have a culture of trust, and as a business to be prepared for the unexpected as much as possible. PREPARING FOR THE FUTURE Speaking from her position of experience on both the lender and broker side of the market, McGinley has various ideas for what might be coming down the line, now that the country is emerging from the pandemic. For example, she speculates that increased regulation might be on the horizon for specialist finance, which is one of the reasons Vibe has upped its regulated credentials. “I do think that there needs to be some form of www.mortgageintroducer.com

regulation for unregulated business,” says McGinley. “There are far too many brokers out there that are being allowed to do things that are not best practice, and they need to be held accountable for what they’re doing. I’d like to think that one day some form of regulation comes in.” In terms of other trends to keep an eye on, McGinley points to holiday lets, the push to add values to properties, exits onto buy-to-let (BTL), commercial to residential properties, and a rising push for green products. In addition, she suggests that supported living will be a growing trend, as the population ages. This part of the market, which naturally contains more complexities, particularly in dealing with inherently vulnerable customers, is currently supported by only a handful of lenders. McGinley adds that the most important thing to remember with any trend within the specialist market, particularly those around commercial to residential conversions, for example, is the exit. At the moment, this also means taking into account a contingency plan to deal with uncertainty and disruption. “The last thing you want is to be stuck on a bridging loan on default interest,” she explains. “And because of the pandemic it’s also about having that contingency. So, add an extra few months on there for unforeseen circumstances, should the project go over, and add that onto the costs as well. Go for the higher term.” For new developers and investors coming to the specialist market, of which McGinley says she is seeing a healthy stream, it is about ensuring they work with the right team to help them navigate these complexities, and any new challenges that might arise in the future. This does not just apply to brokers, but also, for example, ensuring that the conveyancer instructed has the right expertise and experience. PLANS FOR PROGRESSION As the market and the country returns to something like the old ‘normal’, McGinley says Vibe Specialist Finance aims to build on the traction it has already gained among introducers, in part by getting out to as many industry events as possible. For McGinley, the future is about building long-lasting relationships, and the long-term trajectory is to stand alongside the top players in the market. This aspiration includes doubling in size, and it is through recruitment and progression that McGinley sees the future stability of the business being secured. Using those core business values as a basis, Vibe Specialist Finance focuses on training from scratch, giving more opportunities to younger candidates and, in particular, ensuring opportunities for progression for women in this industry. “I love taking people on that are literally brand new to the industry, but who show the right skills and the strength that you need, and morphing them into the adviser that I want them to be,” McGinley explains. M I NOVEMBER 2021 MORTGAGE INTRODUCER

SPECIALIST FINANCE INTRODUCER

FIBA

A welcome back to real audience interactions Adam Tyler executive chairman, FIBA

he middle of October was a milestone for me, as I addressed a real audience once again. Whilst the expectant faces were similar, and the topic – education – was a familiar one, the experience of talking directly to brokers and receiving, and of discussing the feedback face-to-face was one I have certainly missed. The seminar under discussion was part of the wider Mortgage Business Expo (MBE), where FIBA was very happy to be a supporter at this longstanding event. The MBE in London was well attended for their first event back, and also provided me the opportunity to consider the format for the FIBA

Annual Conference in 2022. Following on from our virtual event in January this year – which was a sell-out – and with our lender partners’ participation, this will be a real event for 2022. However, no sooner than I had been addressing a real audience, meeting dozens if not hundreds at the MBE, and planning to do the same at the FP Show in a few weeks’ time, I was suddenly back hosting a FIBA Webinar. This combination of virtual and real is where we are now in our transition over the next few months or more. Our Member Benefits Webinar was an essential way of communicating our progress in providing brokers with access to a whole range of extra opportunities. Over the past few weeks, a number of new elements essential to a broker have been identified and promoted for a commercial offering, where the focus was on services that fulfil one or a number of key requirements in

All attendees also had the ability to ask questions that are relevant to their business

MORTGAGE INTRODUCER NOVEMBER 2021

the same way as the residential broker already enjoys. In what better way than a Webinar, could we quickly ensure that it was understood what each service offers as a benefit to a brokerage, either in the form of discounts or access to a broader range of services, exclusive arrangements or just better rates. So, it was really important that these new Providers were showcased in one place and the best way to do this was, to still to use a Webinar. How else could this information be made available in short order allow a broker to hear direct from these new providers, where each was able to offer a short high-level information overview of the service they offer and how it can best support an broker’s business. All attendees also had the ability to ask questions that are relevant to their business and have them answered in real time, so a decision can be made whether the tool or service was right for their business model. The only way to successfully do this was to use Virtual Technology and plan to follow up with Real Life events to cement the future relationships between our Advisers and Providers. This is the way forward for now, a combination of the two forms of contact and to build in different media such as FIBA TV to allow that interaction and knowledge sharing on different levels to suit all. One point that I really want to make this month is about the support received in providing these events, both virtual and real and in particular recently from our Lender Community. As an example we received sponsorship from this Webinar from the team at Market Financial Solutions, long time supporting lender partners of FIBA, will also brought to us an overview of the specialist property finance markets and their role in the growth of that market. It must not be forgotten that at whatever event you attend, whether it be real or virtual somebody has committed sponsorship to make it happen. This might be overt, or you may not notice it at all, but be assured your knowledge and networking is reliant on this support. M I www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER

BRIDGING

Lenders must chip in to net zero Roxana MohammadianMolina chief strategy officer, Blend Network

arlier this year, the UK’s major housebuilders committed to the net zero roadmap through the Future Homes Task Force, which comprises leading figures from the relevant home building, supply chain, skills, environmental, planning, academic, infrastructure, utilities and regulator communities, and through collaboration with the government. Chiefly, the goals are to deliver highquality homes that are zero carbon ready, sustainable, while being healthy, safe and comfortable from 2025. Furthermore, the plan aims to deliver places and developments that are consistently low carbon, nature-rich, resilient, healthy well designed and beautiful by 2025, production and construction methods that are net zero and sustainable by 2050, with ample and visible progress by 2025 and 2030, and also businesses operations in line with the race to zero: net zero by 2050 with a 50% reduction by 2030. However, as the UK charts its path toward net zero, we are yet to see a similar commitment coming from the housing development finance industry as a whole. There are currently no publicly recognised frameworks, best-practice guides or environmental, social and governance (ESG) checklists for the construction industry.

Harnessing sources of funding ready to invest from non-bank and specialist lenders will avoid further burdens on government finances, especially at a time when there are already existing pressures on government finances. Ultimately, it is key for specialist nonbank lenders to work hand-in-hand with the government in delivering such housing targets. At Blend Network, we are already actively funding green, sustainable and ESG-compliant housing schemes across the UK regions. However, we are planning to further formalise our commitment to sustainable living and a net zero economy by launching our ‘Green is Good’ initiative, for which we will announce more details in due course, in the first quarter of 2022. ADDED BENEFITS

From our borrower’s perspective, environmental performance and ESG credentials can help property developers improve sales or attract better tenants, who are increasingly seeking efficient, healthy, and green certified buildings to live and work in. All in all, incorporating ESG factors

can lead to increased profitability through higher property values, attracting more – and better – tenants and improved returns on investment. From our perspective, aside from making decisions that are socially responsible or morally right, the growing trend of ESG integration across companies and investors makes the need to address sustainability and societal issues within the construction industry increasingly important. This is why our Green Is Good initiative will require community benefits, sustainability and social initiatives (CSS) to be delivered as part of the housing schemes that we fund. We aim to implement best practice in sustainable development finance lending across the UK regions to accelerate investment. In summary, as the UK gears up to meet the government’s target of reaching net-zero carbon emissions by 2050, it is vital and urgent that we align policy and real estate development finance to offer the sustainable housing and infrastructure backbone to a net zero economy. M I

ASSESSING ESG

There are a whole range of ways in which development finance lenders can assess the ESG credentials of the housing schemes they seek to fund. Net zero housing infrastructure needs to be delivered at scale, pace and at the lowest cost to maximize the benefit of net zero and to keep the costs to prospective homeowners and taxpayers down. www.mortgageintroducer.com

As the UK heads toward net zero, we are yet to see a commitment from the development finance industry

NOVEMBER 2021 MORTGAGE INTRODUCER

SPECIALIST FINANCE INTRODUCER

BRIDGING

Researching the best bridging deal Damien Druce commercial director, Black & White Bridging

hile exhibiting at the recent NACFB Expo at the NEC outside Birmingham and then at the London MBE in October, I had time to reflect on the journey that the short term lending market has travelled. Apart from the extensive seminar programmes, both expos boasted a strong line up of stands covering every aspect of commercial finance with the bridging market particularly well represented. The bridging stands were slick and professional and the enthusiasm of the individuals on those stands was palpable. It was a demonstration of the confidence that drives the bridging market in 2021 and the status it now enjoys as a vital part of the property finance market. In contrast, I look back to the first real awakening of the sector as the worst eﬀects of the credit crunch were beginning to recede. With short term lending being the only proactive part

of the lending market at that time and so many of the banks and other institutions had retired from the front lines at the time, expos and smaller events were the place to find bridging lenders of all shapes and sizes, but it was very raw and basic. There was little in the way of professional marketing or presentation; bridging just did what it said on the tin with no hype and precious little of the finesse evident today.

“With new lenders appearing to launch almost daily, brokers looking for the best that our sector can oﬀer are spoilt for choice” So many of the pioneers from those early days are no longer with us, but the present generation of lenders represent a vastly more professional industry than the one from ten years ago, and one which has never stopped growing. Current figures from the ASTL tell us that in Q2 there was a 23% increase in completions over Q1, with loan books sitting on upwards of £4.7 billion. Loans in default are falling but,

Bridging is now a vital part of the property finance market

MORTGAGE INTRODUCER

NOVEMBER 2021

with average LTVs under 60%, funders can continue to be very confident in their strategy of supporting lenders in our space. With new lenders appearing to launch almost daily, brokers looking for the best that our sector can oﬀer are spoilt for choice. So how do they choose from among so many lending firms that seem to oﬀer much of the same? Sourcing engines can do some of the heavy lifting but how can brokers be expected to have intimate knowledge of each lender, their attitudes to risk and underwriting and their ability to turn round AIPs and complete cases quickly. One of the best introductions to the bridging market is for brokers to use the services of a distributor/packager which represents a panel of lenders with whom they work on a regular basis and is ideal for brokers who are either new to bridging or just occasional users. I am a great believer in giving brokers a choice as to how they access Black & White Bridging, which is why they can come to us directly or through a distributor. In our case, we have appointed the multiple award winning specialist, Loans Warehouse whose experienced team can provide unbiased opinions as to the best alternatives for any short term lending case. Brokers can be assured that whatever solution they recommend will have been thoroughly researched. With the complexities of finding the right solution, many brokers have decided to make long term use of distributors like Loan Warehouse, leaving them free to concentrate more time on their bread and butter mortgage business. The choice of lending options in the bridging market makes our sector one of the most versatile in the lending market and with the right help brokers don’t need to feel that choosing the best solution for their client is a problem. M I www.mortgageintroducer.com

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Extremely positive experience.

Amazed.

My experience with Brightstar Financial has been extremely positive, and I would highly recommend the company to anyone seeking specialist financial products. They really are an innovative, proactive, responsible partner who will see to responsibly achieve the best financial product from an equally responsible lender. Thank you to all at Brightstar for what you have done for us.

Our second charge mortgage was finalised within 16 days of our initial conversation with the broker. They kept us up to date at every stage and were on the ball whenever we returned required documents and I was expecting the process to take a month or so, so was amazed when two weeks later I received the call to say everything had completed. Great work! Thoroughly recommend.

Brendan Kennedy

Gemma Budgen

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