Mortgage Introducer September 2020

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ADAPTING TO CHANGE An eye to the future

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EDITORIAL

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

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Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com 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 Joanna Cooney joanna@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Printed by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk Mortgage Introducer, CEDAC Media Ltd 23 Austin Friars, London, EC2N 2QP

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

Good times for now

T

he stamp duty cut, combined with increased demand for homes with additional space and gardens following the pandemic, has driven confidence in the housing market to a four-year high.

According to the Royal Institute of Chartered Surveyors (RICS) prices are increasing at the fastest rate since 2016.

Almost every part of the UK is now seeing prices increases.

And in a reverse of the usual trend the one place which is seeing the opposite is London.

The capital has seen prices remain flat over the past two months.

A net balance of 63% of surveyors and estate agents reported an increase in buyer interest over the month, Other surveys from the mortgage lenders Nationwide and Halifax have also shown strong rises in house prices.

However, the longer-term view remains more cautious.

Despite many brokers reporting record months the UK’s economy remains on the life support provided by

the furlough scheme - which is due to end in October.

The UK is also facing a resurgence in COVID-19 cases. Regional lockdowns are now becoming the norm and the R rate has now increased above 1 (1-1.2 at the time of writing).

The coming months will be telling and will set the tone for 2021.

How businesses adapt to the loss of the furlough scheme and how the economy recovers in the short-term will be a clear indication of what lies ahead.

But we may not see exactly what effect this pandemic will have on the market for some time yet.

Our latest round table on P52 sees a panel of experts consider what may happen in Q4 and the implications for the market.

Whilst it remains unclear at present what the future may hold - coupled with record results for brokers - there may never have been a better time to save for the future. It’s prudent for all to keep one eye on the long-term. M I

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MAGAZINE

WHAT’S INSIDE

Contents 7 9 11 13 14 15 16 17 24 30 34 35 39 41

AMI Review Market Review Housing Review Lending Review High Net Worth Review Recruitment Review Networks Review Buy-to-let Review Protection Review General Insurance Review Technology Review Equity Release Review Conveyancing Review Education Review

17

BUY-TO-LET

48 The Outlaw The latest from our resident outlaw

48

52 Cover: Adapting to change Jessica Nangle covers the key points raised at Mortgage Introducer’s recent round table, sponsored by Barclays, which looked at how the mortgage market will adapt to the new normal and what to expect in the coming months

THE OUTLAW

58 Loan Introducer The latest from the second charge market 66 Specialist Finance Introducer - Interview Justin Trowse of LendInvest gives his take on the brdging market during the time of COVID 70 Specialist Finance Introducer The latest from FIBA

www.mortgageintroducer.com 14:16

70

FIBA

52

ADAPTING TO CHANGE

SEPTEMBER 2020

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REVIEW

AMI

Fighting for justice Robert Sinclair chief executive officer, AMI

R

egular readers and those who have heard me speak know that I am often less than impressed by the way the FCA operates. This time I am far from alone.

In July, the FCA launched an eightweek consultation proposing changes to the way in which it, the PRA and Bank of England make compensation payments to consumers in the event of their own regulatory failings.

The FCA led consultation infers that the revised scheme would ensure the complaints process was more accessible but does not explain how, and also sees the maximum amount of compensation for financial loss capped at £10,000 per case and for distress and inconvenience at £1,000. The complaints scheme allows consumers and firms to complain about the way our regulators have acted, but the payments are often small and often only after the independent complaints commissioner gets involved.

The commissioner has been very critical of the FCA’s performance on handling complaints, particularly over the past 18 months. As AMI

was finalising its response to the consultation, campaigners Gina and Alan Miller issued an open letter to the Treasury Select Committee branding the proposals as “intellectually dishonest and morally questionable”, calling for the consultation to be suspended.

The “True and Fair Campaign” led by the Millers also criticised the eightweek timescale of the consultation which had taken place over the summer holidays and during an unprecedented pandemic. Ms Miller has called for the consultation to be suspended until the findings of three ongoing independent investigations into the FCA management of firm failures, namely the HBOS Reading scandal, London Capital & Finance and Connaught, were published.

As previously mentioned, the Complaints Commissioner has raised a number of concerns about staff numbers in the FCA internal complaints team, management quality, the approach to complainants and the time taken to deal with complaints.

His growing frustration with FCA senior management shines out of his most recent findings. The consultation does nothing to explain or address these issues. With no measures or remedies to fix these, AMI is calling for clarity on both any revised data and oversight being reported internally.

The FCA Board should be setting out details of the actions they have asked for in order to allow them to have a focussed view on how successful the remediation proposed is operating.

We are calling for clarity on Board oversight of this crucial area which is a measure of management performance.

These should benefit from transparency via open publication.

In previous years under challenge from AMI, the FCA has outlined that it has implemented the Senior Managers Regime within the organisation. In commercial firms this means that both Senior Manager functions and Material Risk Takers can have their bonus terms impacted by poor outcomes.

AMI considers it equitable that any compensation paid by the FCA in a financial year should be deducted from any budgeted bonus pot thereby meaning firms are not paying for management failures. This would be tangible evidence of the application of their own scheme which currently appears little more than cosmetic.

Any solutions other than suggested here will be the FCA trying to paper over the cracks of a failing organisation.

Nikhil Rathi should be stopping this in its tracks as one of his first acts. Those who suffer even under accidental errors deserve justice and firms who have had no part should be protected. M I

Loose ends – stormy waters ahead

I

am becoming concerned about what next February and March might feel like.

As the existing Help to Buy scheme ends, pressure will escalate on builders, conveyancers, lenders and brokers to ensure timely completion.

At the same time, the 3% stamp duty reduction will be coming to a close and lenders, conveyancers and brokers will need to work hard to meet that deadline.

I predict that this will make the surge we saw on BTL purchases in 2016 look like a walk in the park.

www.mortgageintroducer.com

These artificial cliff edges created by government intervention are always fraught with risks, so we need to escalate these issues to avoid some very annoyed customers who might end up paying a lot more than they thought to complete their transactions. If there is no change, brokers will have to work very hard to manage customer expectations and keep transactions on target.

But, it is great to see the CMA finally call out some builders for the lamentable practice of having sold leasehold houses with damaging rent escalation clauses.

It will take time for any remedies to work their way through but there is now hope for many who are property prisoners. A shame that it has taken competition authorities to do this, not our Housing Minister.

The other group of property prisoners are those caught in high rise buildings with cladding issues. If there was one issue that needs sorting and sorting now it is this post-Grenfell mess.

This government and Housing Minister are the only people who can sort it and they should be shamed for their inaction.

SEPTEMBER 2020

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REVIEW

MARKET

Consumer behaviours are changing David Lownds head of marketing and business development, Hanley Economic Building Society

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ike all businesses operating in and around the mortgage market, lockdown caused us to re-evaluate our technology, procedures and processes.

When it comes to policy and criteria, feedback from intermediary partners has highlighted that clarity and simplicity, alongside competitive product offerings and strong support networks, are vital in ensuring that the intermediary market can service the ever-changing needs of clients throughout this uncertain period.

With lenders working hard to meet these expectations, it’s little wonder that we are experiencing growing levels of optimism as we move into the later stages of 2020.

INTERMEDIARY CONFIDENCE

This optimism was outlined in data from the Intermediary Mortgage Lenders Association (IMLA). The number of advisers feeling either ‘fairly’ or ‘very’ confident about the outlook for the intermediary sector rose from 85% in Q1 to 88% in Q2.

The majority (93%) of intermediaries remained positive about the outlook for their own businesses in Q2.

This follows fluctuations in Q1, as positivity amongst intermediaries towards the market in January (95%) and February (97%) gave way to concern at the start of the crisis, with 47% of intermediaries not confident about the outlook in March.

The data comes as advisers face an unprecedented level of demand from clients eager to press ahead with plans to buy property. IMLA found that the average number of cases handled by www.mortgageintroducer.com

intermediaries in the past 12 months is beginning to recover, from 81 in March to 86 in May and 87 in June.

The report added that almost twothirds (63%) of advisers’ cases in Q2 stemmed from residential activity, of which 25% consisted of refinancing (16% remortgage and 9% product transfers), 20% from movers and 19% from first-time buyers (FTBs).

ACTIVITY LEVELS

It’s clear that a robust housing market is the key driving force behind this increased confidence, as growing numbers of FTBs and home movers are taking advantage of the temporary stamp duty holiday.

This was highlighted in the Rightmove House Price Index for August, which found that home movers had put more property on the market and agreed more sales than during any month for over 10 years, worth a record total of over £37bn.

The index also found monthly price increases in 10 out of 12 UK regions, with a record high in new seller asking prices in seven of them. The biggest monthly changes were seen in Wales (2.9%) and the North East (1.7%), while the only negative figures were in London and the South East.

Sales agreed were reported to be up across all sectors of the market: 29% for FTBs, 38% for second steppers and 59% for larger, top-end homes. The latest weekly figure for number of sales agreed was up by 60% compared to the same week in 2019, and 44% more properties came to market compared to the same period a year ago.

Whilst high activity levels throughout the housing market are encouraging, we need to be mindful of a variety of influencing factors from wider economic sources which could impact borrowers and how we, as lenders, are able to service these demands moving forward.

REMORTGAGE

According to LMS’ Monthly Remortgage Snapshot, remortgage completions rose by 78% in July 2020.

The Snapshot went on to add that 31% of borrowers remortgaged for the purposes of lowering monthly payments, while two-fifths (39%) increased their loan size.

Almost half (47%) of those who remortgaged were reported to have taken out a 5-year fixed rate product – the most popular product choice in July. The average loan increase postremortgage was £20,208, while the average decrease was £10,497.

The remortgage market continues to evolve in line with shifts in consumer behaviour, with nearly three-quarters of borrowers reporting that their motivation was down to greater security over monthly outgoings. This gives a strong indication of the current consumer mentality.

A considerable proportion of remortgage activity will also stem from homeowners inspired to improve their current property.

Research from money.co.uk found that UK homeowners have spent a total of £55bn, and an average of £4,035.70 each, on renovations. Garden upgrades (34%) topped the list for the most popular lockdown renovation project, closely followed by work on the living room (23%), bedroom (22%) and kitchen (22%).

Almost a quarter (24%) used money originally intended for a holiday to finance their new home improvements, which was second only to general savings (26%). Some even sacrificed their ‘big day’, as 4% revealed they used savings originally intended for a wedding or engagement ring.

When asked why they chose to invest in their home, 27% of homeowners wanted to add value.

The sudden proliferation of virtual meetings has also played its part, as 40% of British homeowners admitted to ‘Zoombarrassement’ over the appearance of their homes.

Mortgage lenders are certainly sitting up and taking note of trends and behavioural patterns, and these will provide an interesting pattern to follow over the next few months. M I

SEPTEMBER 2020 MORTGAGE INTRODUCER

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REVIEW

HOUSING

Multi-generational living is on the rise Graeme Aitken business development manager, Harpenden Building Society

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last two decades, having increased by three-quarters to 297,000. From what we’re seeing, the pandemic has only added to this.

BUYING PROPERTY TO FILL THE NEED

s we gradually edge towards a post-pandemic era, we’ve all been forced to think differently – particularly about how and where we live.

During lockdown, we saw numerous examples of families moving in together to share resources and save money. This might be to care for older generations or sick family members, as well as isolating together so face-toface contact could be maintained. The question is, could this become a more permanent arrangement?

Over the past few months at Harpenden we have noticed an increase in the number of enquiries for intergenerational purchases – families buying a property together.

This may be driven by the factors touched on earlier, longer term financial planning or thoughts of being to hand as parents get older. Often, both parents and their adult children, with their partners, are selling up to fund the purchase of a bigger property that can accommodate everyone.

THE RISE IN FAMILIES LIVING TOGETHER

In scenarios like this, the property being purchased is likely to comprise either an annexe or a separate dwelling, both of which appear on the same property title. In either instance, we are happy to consider these for mortgage security purposes.

Specialist lenders like ourselves, which provide individual underwriting for every mortgage application, are more readily willing to accept this type of property, whereas we know from our experience that mainstream lenders often shy away from property where more than one dwelling appears on the same legal title.

This type of intergenerational purchase may also require up to four parties to be named on the mortgage and property title, with all four incomes being used to assess the affordability of borrowing required.

When this includes older parents, the aspect of their ages and lending into retirement is often queried. Again, this does not present a problem for a specialist lender, provided that we are satisfied that the term is appropriate for

PROPERTY TITLE

Intergenerational living has been the norm in many European countries, particularly in Southern Europe, dating back centuries. It’s a lifestyle that continues today and could become more widely adopted here in the UK. In Italy and Spain, the last economic down turn of 2008 forced thousands of the younger unemployed to weather the financial storm by living with parents and wider family. In the decade following, the share of Italians between the ages of 25 and 29 who were living with their parents rose to 67% from 61%, according to Eurostat. In Spain, this figure expanded to 63% from 51%.

With the Bank of England predicting the worst recession in 100 years here in the UK, intergenerational living could become part of the ‘new normal’.

Even before COVID-19 took hold, figures from the Office for National Statistics (ONS) stated that households containing multiple families (representing 1.1% of all households) were the fastest growing type over the www.mortgageintroducer.com

the individuals involved, whereas many other lenders are less flexible with regard to the maximum age to which they will lend.

We recommend that mortgage customers choose a lender that considers: salary, dividend and net or retained profit for Limited Company self-employed; includes up to 100% of other income including commission and bonus; and accepts unearned income such as pension, rental, investment and maintenance.

This deeper dive into a customer’s finances provides more flexible options.

CREATING RELEVANT OPTIONS

As we develop intergenerational mortgage products, we carefully assess the opportunity for the customer, the intermediary and ourselves as the lender. Part of this process is speaking with people from our local community to understand their situations and future needs.

Gary Cooper, who lives in Hertfordshire where our society is based, created an ‘intergenerational’ property two years ago.

He told us: “Our situation was probably like many: we wanted to personally care for my mother in law Molly (96).

“She sold her own place, allowing us to arrange finances so we could all share a property with an added ‘granny annexe’. Since moving into the adapted property Molly has her own bedroom, lounge and wet-room, affording her privacy but also the opportunity to join us for family meals and the like.

“For us as carers, we are seconds away from her when we’re needed.

This set up has allowed a more relaxed way of living knowing Molly is safe, [while] my mother in law is enjoying being surrounded by family, including spending time with her granddaughters, and we can look after her in the way we want to.

“I think intergenerational living will only increase in popularity.”

All the signs point towards an increase in intergenerational living.

Partnering with an experienced lender in this specialist field is a strong option for mortgage intermediaries looking to grow business in this sector. M I

SEPTEMBER 2020

MORTGAGE INTRODUCER

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REVIEW

LENDING

Lending responsibly in a dynamic market Stuart Miller customer director, Newcastle Building Society

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his is a very important question that all lenders will be thinking about: what does responsible lending look like today, given the impact of COVID-19?

To understand that, we can at least be thankful that one of the advantages of the way the UK regulates mortgage lending is the degree of flexibility the regulation inherently affords.

The concept of being responsible when making lending decisions is at once easily understandable and also fluid enough for lenders to be able to achieve the right customer outcome depending on individual circumstances.

Responsible lending post-Mortgage Market Review (MMR) has been based on affordability. This has not changed as a result of the pandemic, but how we assess affordability now requires careful thought.

How unemployment unfolds over the coming months is not certain, but we cannot ignore the mood music.

In the UK, we have already begun to see the consequences – almost two million people took up the governmentendorsed option of a mortgage repayment holiday.

Meanwhile, at the time of writing, in excess of 750,000 jobs have been lost in the past three months. By the time this column is published, I fear that number will be much higher.

The Labour Force Survey suggested the average measure of employment was reduced to only 220,000, some 0.7% lower in the three months to June than in the prior three, and just 0.2% lower than at the start of the year.

However, as Samuel Tombs, chief UK economist at Pantheon www.mortgageintroducer.com

Economics pointed out in a research note in August, people are counted as employed if they are temporarily away from a job receiving no pay, or if they are furloughed with support from the Coronavirus Job Retention Scheme.

The Office for National Statistics (ONS) estimates that 7.5 million people – 27% of employees – fell into these two categories in June.

As unpalatable and distressing as it is, we are barely at the start of this recession; unfortunately, the truth is that many more people will lose their jobs and many of them will struggle to find new employment.

The whole shape of our economy looks likely to shift as well. While it’s still unclear when – or whether – the vast majority of people who are able to work from home will go back to working from the office, there are serious commercial implications for those in jobs that service office workers.

Retail and hospitality sectors are going to feel prolonged pressure.

The effect of this on arrears and possessions, even where significant forbearance is applied, will be felt.

At the same time, Chancellor Rishi Sunak’s six-month stamp duty suspension on home purchases up to £500,000 has bolstered prospective buyers’ financial positions, many of whom suddenly found their affordability improved.

The knock-on effect of this change in the housing market has been substantial. Rightmove data published in August showed home-movers have put more property on the market and have agreed more sales than in any month for over 10 years, worth a record total of over £37bn.

This is leading to monthly price increases in 10 out of 12 regions, with a record high in new seller asking prices in seven of those regions.

Prices usually fall at this time of year, as sellers try to tempt buyers distracted

by the holiday season, with the national average monthly fall for the last 10 years being 1.2%. While there has been a slight monthly fall of 0.2% (£768), this is due to London’s more normal seasonal fall of 2%, reversing what would otherwise have been an unseasonal national rise.

We are also facing a potentially big shift in the variables that affect property value – will proximity to public transport and railway stations continue to be so vital in a world that works mainly from home?

If we are working from home, reliable broadband and fibre access suddenly becomes critical, and following lockdown restrictions, access to a garden is now a must have for many buyers, all of which is almost certainly going to have some bearing on prices.

Set against this backdrop, the reality is that lenders face the unique situation of having to support an increasing demand for lending with large numbers of staff working from home.

Swap rates are diverging from Bank base rate, quite understandably reflecting some of this uncertainty and the risk it represents.

We must ask ourselves: what does the new responsible look like? Lower loanto-values (LTVs) put in place provide some cushioning against a potential drop in sales values, both for the lender and the borrower. Job security is now a fundamental consideration, as is spare affordability to tide borrowers through any unexpected unemployment or loss of income.

As a building society committed to supporting our communities, we have to think not only about how we say yes to borrowers, but also when a lower level of borrowing might be the more responsible route.

Furthermore, we have to give substantial consideration to how we can helpfully and efficiently deliver this right kind of lending when the decision-making process that underpins underwriting is inevitably becoming more complex.

Understanding borrowers’ individual circumstances has never been so vital, and we are working hard with our intermediary partners to make sure everyone gets the right decision. M I

SEPTEMBER 2020 MORTGAGE INTRODUCER

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REVIEW

HIGH NET WORTH

COVID-19 changes to taxation policy Peter Izard business development manager, Investec Private Bank

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he economic crisis has catapulted many into a state of deep uncertainty.

For financial advisers and intermediaries, keeping track of an ever-evolving economic backdrop is a challenge the extent of which few could have expected.

Even now it remains difficult to predict the disruption still to come.

From both a public health and an economic perspective this crisis continues to evolve, and with it so too do the government’s responses.

Faced with tackling both a global public health crisis and an economic recession, these measures have been plentiful, and rightly so. This encompasses support measures such as the Coronavirus Job Retention Scheme, which is set to remain in place until October, along with multiple and varied Business Grant Funds.

There have also been changes to taxation policy designed to minimise the negative economic implications.

This has resulted in guidance being updated, and we may see further changes on the horizon. Undoubtedly, tax (both cuts and hikes) will play an important role in helping revive certain parts of the economy.

There are a number of specific tax implications when it comes to property, which I will explore here.

One of the biggest financial challenges is that we could see a significant fall in asset prices. If values do fall significantly, the implication for property developers who build to sell is that they could face difficulties selling.

In this case, we expect that many may choose to move to a different

14

strategy in the interim of holding for a few years, meaning they will need to refinance from development funding to investment funding.

This may mean that debt financing is more expensive, or even difficult to obtain as clients are looking at higher loan-to-values (LTVs) due to lower property valuations.

PURCHASING NEW PROPERTY

The recently introduced Stamp Duty Land Tax (SDLT) holiday on the first £500,000 of consideration paid toward a property purchases in England and Northern Ireland will bring relief to the property market, both for investors and those looking for property to live in.

It is worth noting that the 3% SDLT surcharge for additional property purchase in England and Northern Ireland will continue to apply during this window.

For overseas investors, this may provide an additional incentive to invest now, as opposed to after April 2021 when the holiday has ended and overseas investors will be liable to a new additional 2% surcharge.

As part of its package of financial relief measures, the government has also introduced the deferral of mortgage and loan payments.

For all borrowers of property-related debt, the cashflow benefits of taking a payment holiday are clear when it comes to mitigating the financial impact of COVID-19.

For property investors, however, the position is less straightforward. Whilst there may be benefits from a cashflow perspective, deferring interest payments may also restrict the associated tax relief, and it should be noted payment deferrals are expected to be passed on to tenants.

Consequently, when it comes to the investor doing their tax return at the end of the year, they may have a larger taxable profit without the deduction

MORTGAGE INTRODUCER SEPTEMBER 2020

of deferred interest payments, and therefore more tax to pay.

The travel restrictions put in place as a consequence of the pandemic have created significant disruption to international business operations.

This may have resulted in decisions and action being taken in countries where they would not normally take place. Individuals need to consider the impact from a personal and business tax presence perspective.

Every client has unique situations and needs, which tend to be in part determined by their tax residency and domicile status, because this status impacts the way that an individual’s income and gains are taxed.

The reason this matters to lenders is because when credit assessments are carried out, lenders need to understand what liabilities clients have and what reliefs are available, so that these are appropriately considered, as they impact the qualification for certain financial products (such as individual savings accounts (ISAs) that are only available to UK tax residents), and determine the requirement for locationspecific tax reporting.

The intricacies concerned with determining where an individual is tax resident and where they are domiciled can be complex at the best of times.

COVID-19 has compounded this, creating circumstances that months ago we would rarely have had to assess.

As brokers and trusted advisers, it has never been more important to be aware of the changes in the tax landscape. For those dealing with property assets, the need is even greater.

This article is for general information purposes only and any reference to tax should not be used or relied upon as professional advice.

It is based on regulations in effect at the time of publication and no liability can be accepted for any errors or omissions, nor for any loss or damage arising from reliance upon any information herein.

It is advisable to contact a professional advisor if you need further advice or assistance as the tax implications can vary depending on personal circumstances and may be subject to change in the future. M I www.mortgageintroducer.com

REVIEW

RECRUITMENT

Resilience and agility are key to survival Pete Gwilliam director, Virtus Search

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he unemployment rate of the United Kingdom in 2019 was 3.8%, the lowest since the mid-1970s. However, the UK government’s spending watchdog, the Office for Budget Responsibility (OBR), suggested unemployment could more than double to 10% this summer – a level we have not seen since the mid-90s.

The three-month period from March to May saw UK GDP fall by 19.1%, and the figures for April to June confirm that the UK is in a severe recession.

The last recession in the UK, caused by the global financial crisis, lasted five quarters from Q2 of 2008 onwards. GDP fell by an estimated 7.2% over the whole period, with unemployment rising suddenly in 2009 to 7.6% (between 2000 and 2008 the unemployment rate fluctuated between 4.8% and 5.7%).

After peaking at 8.1% in 2011, unemployment gradually declined before returning to the levels seen in the early 2000s by 2015.

In the previous recession, HM Treasury started recapitalising banks by buying up shares and nationalising those doomed to fail. In addition, the Treasury put a large sum of money into the Financial Services Compensation Scheme (FSCS) to assure savers they would not lose their money.

Quantitative easing was used from 2009, and moreover the government revealed a Working Capital Scheme, as well as rolling out the Enterprise Guarantee Scheme and the Capital For Enterprise Scheme.

The Coronavirus Jobs Retention Scheme has been the most talked about www.mortgageintroducer.com

“The end of the government schemes will be the turning or breaking point for businesses of all sizes, not least because Brexit also looms...”

make some payments. From 31 July employers will pay employees’ NI and pension contributions, even for the hours the employee does not work.

The fact that businesses will soon be expected to contribute towards furloughed staff’s wages will sharpen the focus of what firms believe to be the right size (and cost base) in the future.

There are several factors that will be considered:  What is the cost-to-revenue ratio of the firm, and how long can the firm sustain its cost base on reduced earnings opportunities?  What problems for the performance of portfolios have mortgage payment deferrals masked, and how will the increased costs of servicing arrears (and loss provisioning) challenge operating models, especially when a good number of lenders will have enjoyed one of the most benign periods in terms of debt servicing ?  How does the wider economic backdrop affect demand?  What have firms learned through the enforced period of change to working practices, and how will these considerations impact future working models, and therefore headcount?

The scheme initially allowed employees to receive 80% of their monthly salary up to £2,500.

Originally, furloughed employees couldn’t do any work for their employer, but from 1 July they can go back to work part-time (for example, an employer could pay someone to work two days a week, while the furlough scheme covers the rest).

Employers that furloughed staff can also claim National Insurance (NI) payments and minimum pension contributions up until the end of July.

From 1 August, however, employers will have to pay National Insurance and pension contributions for their staff, and from September, they will have to pay 10% of furloughed employees’ salaries – rising to 20% in October.

In the first phase of the scheme until the end of June, employers can choose to top up the employee’s salary above 80% but they are not obliged to. In the subsequent phases until the end of October, employers must start to

We’ve already started to see the impact of big industries cutting their cloth to survive the pandemic with 600,000 jobs lost in the first few weeks of lockdown.

What we don’t know is to what extent the process of phasing out the furlough scheme will create a further spike in redundancies between September and November.

The end of the government support schemes will be the turning or breaking point for many businesses of all sizes.

The resultant spike in unemployment will surely be a major determining factor in the performance of the housing market and lending volumes next year and beyond, not least because the disturbance of Brexit also looms.

There are no ‘oven ready’ solutions, but what is sure is that businesses and individuals will need to be resilient and agile. With that in mind, next time I will explore why career coaching is an invaluable resource for anyone seeking a new job. M I

part of this government’s response, allowing firms to put workers on leave, keeping them employed whilst the business recovers from the disturbance of COVID-19.

The Treasury suggests 9.4 million workers are now covered by the government’s furlough scheme (more than a quarter of the UK workforce), while he Institute of Employment Studies (IES) has reported that an additional 1.6 million claims for benefits have been submitted since March, the fastest rise since the depression of 1929.

SEPTEMBER 2020 MORTGAGE INTRODUCER

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REVIEW

NETWORKS

Cheapest is not necessarily best Shaun Almond managing director, HL Partnership

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ogic tells us that if two loaves of bread of the same quality are priced so that loaf A is cheaper than loaf B, then clearly loaf A is the one we should buy. Indisputable fact. We can make the same case in an infinite number of examples.

The key considerations are that there is no material difference in the makeup of the object or the impact the purchase will have on the buyer.

When assessing which mortgage is the most suitable for customers, having chosen candidates from the broadest selection of suitable alternatives, advisers then run into a knotty issue.

Namely, the definition of which is in fact cheapest.

If we accept that the best mortgage among those options is the one which has the lowest rate at outset, then are we really providing our customers with the best option, or just ticking a box and in fact not doing the job we are being asked to undertake?

Understandably, the regulator wants the best outcomes for customers, and sees cost as the key determinant in assessing the right mortgage or lending arrangement. However, the obsession with ‘the cheapest’ has led to a skewing of the meaning.

For advisers who use sourcing systems every day, the default setting provides a list of lender products in order of headline rate cost – namely, the cheapest available monthly payment at the start of the mortgage.

Job done? Hardly. What we should be ensuring is that the definition of ‘cheapest’ also pays attention to value.

Mortgages which have a notional term of 25 years might have fixed or discounted rates over a set period within that notional term. A diligent mortgage adviser would ensure that their client remortgages before the

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MORTGAGE INTRODUCER

standard variable rate (SVR) becomes applicable. But just because a mortgage sits at the top of a research list on a sourcing system does not mean it represents the best value for a customer who may not expect this to be the only mortgage in their lifetime, and who is going to pay it off after 25 years.

Property ownership is not that simple.

Let’s also not forget that comparing like for like can throw up anomalies that nullify the argument that the cheapest headline rate is the best for the customer.

What are the charges being levied associated with the mortgage with the cheapest headline rate? How about the penalties for early redemption – particularly at this time when lenders are struggling to cope with the postlockdown and stamp duty holiday housing market boom?

Will the cheapest mortgage still be available when required, and can it be processed in time to complete?

Any future definition of cheapest must reflect the actual value of our recommendation and mitigate any risk that we become glorified price comparison websites.

The Mortgage Market Review (MMR) demonstrated that the real

Advisers must consider value as well as price

SEPTEMBER 2020

value to customers lies in the advice that complements the product recommendation.

The regulator’s investigation into the general insurance (GI) market and the disparity of pricing to new and existing customers provided evidence that headline rates do not necessarily offer a true reflection of the value of advice.

ARE THE SCALES TIPPING TOWARDS AR STATUS?

If an adviser firm has the resources to employ a dedicated compliance officer or can afford an external compliance service that does more than simply check a limited cross-section of files for its fee, then don’t let my arguments stand in your way.

However, with the current pool of professional indemnity providers shrinking, the decision on appointed representative (AR) or directly authorised (DA) is becoming increasingly more important.

Even with impeccable records, more DA brokerages are seeing their premiums increase to a level which is becoming potentially unsustainable.

Being directly authorised also means a growing need to invest in technology that not only helps administer new business, but is easy for professional indemnity (PI) insurers to audit in the event of a claim. Failure to have such a facility could result in being refused PI cover, or at best a hike in premiums.

The facts are undeniable. The cost of remaining independent is rising and will continue to do so. Meanwhile, the public’s perception of the value of dealing with a DA firm is no longer the cachet it was.

With higher or equivalent procuration fees more likely to be available in the AR space, along with PI cover provided at network level, access to market leading customer relationship management (CRM) systems and a full panel representative of the whole lender and protection market, the only question for me to ask DA firms is when they are going to join a network! M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Four things landlords need to be aware of Adrian Moloney sales director, OneSavings Bank Group

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ou don’t need me to tell you what a challenging year 2020 has been. In these strange times landlords, like everyone else, can be forgiven if their minds have been elsewhere.

However, despite the disruption, there’s been a lot of important things happening in the housing market which could affect landlords and which they need to be aware of.

Perhaps the thing that could have the biggest impact on landlords’

profitability is the phasing out of mortgage interest tax relief. Landlords can no longer deduct any of their mortgage interest payments from their rental income before paying tax.

Instead, they will now receive a basic tax reduction of 20% from their income tax liability.

Although this has been phased out incrementally over the last four years, there may be some who haven’t experienced the full impact yet, and won’t notice until their 2020/21 tax return. It is worth having a conversation with them now, and ensuring they seek the proper legal and tax advice.

Landlords must ensure that new electrical safety standards are satisfied when a property is occupied. All rented properties now need to be certified by

an Electrical Installation Condition Report (EICR), prepared by a suitably qualified person and supplied to each tenant within 28 days of the inspection.

Properties with existing tenancies will need to follow this new legislation by 1 April 2021. It is a legal requirement that all properties are tested and reinspected at least every five years.

Landlords must now ensure that their existing tenanted properties meet Minimum Energy Efficiency Standards (MEES) and have an energy performance certificate (EPC) rating of at least E. Properties with a rating of F or G are now considered unrentable.

Landlords need to bear in mind that EPCs are only valid for 10 years.

Any landlord not complying could be fined, dependant on the type and duration of infringement.

Finally, I’m sure you’re already aware of the stamp duty holiday, but it’s worth reiterating that it could be a good opportunity for landlords looking to extend their portfolios or first-time buyers looking to get a foot on the property ladder. M I

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REVIEW

BUY-TO-LET

A strange time for a birthday Bob Young chief executive officer, Fleet Mortgages

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iven all that has happened within the last six months alone, it might seem rather odd to be referencing something from six years ago, but at approximately this time back in 2014, Fleet Mortgages was established and we embarked on our own journey, with all the excitement and trepidation that comes with such an undertaking.

To say that a lot has happened since then would be something of an understatement. For those who might have been trying to forget, this was a time pre-Brexit referendum, when we still had a coalition government, and when the UK’s position within the EU didn’t truly seem under threat.

From our market’s perspective, it was also a time before the stamp duty surcharge, a time when the changes to mortgage interest tax relief had not been introduced, and when it became clear that there was a significant opportunity for an intermediaryfocused buy-to-let (BTL) lender – with bags of experience – to make a mark and provide the products and service that advisers and their landlord clients were looking for.

Looking back, and with a healthy amount of hindsight, I have often wondered whether that window of opportunity during the second half of 2014 for us to launch as a lender was one which would be closed soon after.

With everything that was to follow – particularly the stamp duty and mortgage interest relief changes, but also the greater administrative burden placed upon landlords – was that the last point at which it was possible to launch a successful buy-to-let lender?

The management team at Fleet have been around the mortgage block more than a number of times, particularly when it comes to the buy-to-let market,

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but even with all our experience and focus, there’s no doubting that we’ve had to work through some incredibly tough times during that six-year period.

HIGH HOPES

Other ventures, which could not draw upon that same amount of experience or did not have the relationships in place with funders or intermediaries and distribution, would possibly have found it even more difficult, might never have got off the ground or would have faltered along the way.

Which, of course, brings us up to 2020. How different this year has turned out for all of us, irrespective of our professions or our hopes for what might have been.

Back at the tail end of 2019, everyone at Fleet had high hopes for the year ahead in terms of activity levels and what we might be able to achieve with our partners.

Once COVID-19 hit, however, the whole environment changed. As I said at the time of the lockdown, it became much more about survival than anything else.

Our focus throughout that period was on ensuring there would be a Fleet

The market is still trading despite slings and arrows

MORTGAGE INTRODUCER SEPTEMBER 2020

Mortgages at the end of lockdown – whenever that might have been – and all our resources and energy went into working towards that goal.

A few months on, the fact that we are able to think about this being our sixyear anniversary perhaps tells you how far we’ve come during the intervening period. At the same time, I am acutely aware that there is a significant amount of water to flow under the COVID-19 bridge before this market is anything like the one that opened the year.

Perhaps it will never get back to that point.

STILL TRADING

We have been fortunate – we essentially didn’t stop lending through lockdown, although we could only take applications up to the point of securing a physical valuation.

However, since the housing market was reopened in May, we have upped activity and, working closely with our funders, have been able to move back into various parts of the buy-tolet sector, upping our loan-to-value (LTV), cutting rates and shifting back towards pre-COVID-19 criteria.

These are small steps of progress, but in March and April they seemed like very big ones.

The government decision to offer the stamp duty holiday to additional property owners, namely landlords, has also helped. The pent-up demand we were seeing be unleashed postlockdown has been given a further boost, providing a further incentive for landlords to add to portfolios.

Perhaps the most important thing for everyone active in the mortgage market is – I hope – that we are all still here, still trading and we have been able to keep going despite the slings and arrows that have been thrown at us.

That, in itself, is something to be thankful for. The added cherry on the top for us as a business is that we can celebrate our sixth birthday at the same time, while feeling strong and capable enough to deal with whatever else the future might bring. M I www.mortgageintroducer.com

REVIEW

BUY-TO-LET

Agile thinking is required in buy-to-let Jeff Knight director of marketing, Foundation Home Loans

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ecession is, quite rightly, a scary word for all industries, businesses and individuals.

There have been a variety of headlines around job losses at wellknown organisations, and it continues to be an extremely difficult time for many people.

RAPID RECOVERY

Finding ourselves in the midst of a recession is hardly surprising.

Nevertheless, according to recent comments from the Bank of England’s chief economist, the UK economy is on course for a rapid recovery, despite suffering the worst recession since records began.

A major contributing factor in this trajectory is strong consumer spending, which is reported to have helped recoup nearly half the losses caused by the pandemic.

This doesn’t mean that the next few months won’t generate their fair share of additional challenges. It’s unrealistic, for instance, to think that more companies like M&S won’t suffer from job losses.

However, many people and businesses have used this period to arm themselves with the fortitude and knowledge to help – where possible – combat what will inevitably remain a tough period. On a more positive note, this period is also likely to provide ample opportunities for those businesses, landlords and intermediaries that are agile in their thinking.

Whilst a recession is a time when some sectors will inevitably suffer, others will thrive. For example, high street retail may be struggling, but www.mortgageintroducer.com

in sharp contrast, online retailers are finding their profits are rising. There are many other instances of this trend throughout history.

Other business types that will also benefit include technology providers, delivery companies, streaming services, social media platforms – I could go on.

DEMAND FOR ADVICE

According to OpenMoney’s UK Advice Gap research, almost three in 10 (28%) respondents said they would not be comfortable choosing an appropriate mortgage.

Personally, I think this figure may well be too low – it would be interesting to ask if those who stated they were comfortable with this process were as confident when it came to achieving the most appropriate and competitive deal possible.

The report also found that in the last two years, 12% had fallen behind on paying essential bills, including mortgages, while 13% had been unable to afford a deposit to move house.

Some 59% (2019: 56%) reported having some form of household debt and 44% (2019: 46%) had run out of money before their next pay at least once in the previous year.

In addition, a million more people than last year felt that they would benefit from financial advice, but are either unaware of or unable to access free services.

Respondent confidence in their own ability to manage money and make financial decisions remained high, with 62% (2019: 64%) stating that they did not need any help or advice.

In the last two years, just 10% of those surveyed had taken paid-for advice. Of those who had not, eight out of 10 (79%) said they were unlikely to do so in the future, while 25% would be unwilling to pay for financial advice when arranging a mortgage or buying a house.

As already alluded to, agile thinking is required to take advantage of the increased need for advice throughout the intermediary market.

Unlike during the dark days of the credit crunch – when advisers were severely restricted in terms of the product choice available for clients – there is now strong competition across the mainstream, buy-to-let (BTL) and specialist markets.

Focusing on the BTL market, there are a growing number of opportunities emerging for intermediaries to engage with a variety of landlords across the UK looking to extend and maximise their portfolios.

This pent-up demand from landlords has only been further exacerbated with their unexpected access to the stamp duty holiday.

FOCUSED ADVISERS

When combined with this increased lending competition, we are in the midst of a busy time for focused advisers with landlord clients who are looking to purchase or remortgage.

When further evaluating conditions which the BTL sector has – and continues to – overcome, research from BVA BDRC outlined some areas of both weakness and strength from a regional perspective.

It found that half of landlords with property in Central London report tenant demand to be ‘weak’, up from 38% in Q1.

Other regions are said to have been less impacted, with landlords operating in the South West and North West most likely to report that current demand for rental properties is ‘strong’.

These are regional differences which intermediaries need to think about and, for landlords, the old adage still rings true: if buying, buy in the area that you know. Or that their adviser knows.

I have spoken to brokers in the East Midlands who were talking about large local employers who may be at risk and were planning accordingly.

This really underlines the fact that local knowledge is more important than ever when it comes to managing client expectations and supporting them – as well as your own business – through these uncertain times. M I

SEPTEMBER 2020 MORTGAGE INTRODUCER

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BUY-TO-LET

Buy-to-let activity boost Jane Simpson managing director, TBMC

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here are encouraging signs that the buy-to-let market is making a recovery since the housing marketing reopened at the beginning of May with the return to visual inspections in England.

Since then, we have seen a flurry of activity from lenders as they reassess their buy-to-let mortgage propositions in response to greater demand and increased competition.

This has resulted in more products being offered, better rates, higher loan-to-values (LTVs), increased maximum loan sizes and many other criteria tweaks, all of which reflect the growing confidence among lenders and landlords.

There are other factors that have come about as a result of COVID-19 that may also help the buy-to-let sector to rebound, and provide a boost to mortgage business for intermediaries.

The temporary change to stamp duty on properties valued up to £500,000 was predicted to create a surge in buyto-let purchase applications, and there is indeed evidence that this has started to happen since the measure was announced in July.

At TBMC, since the end of July, the percentage of enquiries about mortgages for buy-to-let purchases has risen to around 72% compared with just below 50% during the month of June. This is a significant change, and indicates a renewed level of purchase activity from landlords.

A recent poll carried out by mortgage adviser forum Cherry showed that more than half of brokers had experienced increased buy-tolet business, including an increase in individual purchases (30%) and limited company purchases (27%).

There is clearly pent-up demand from landlords who see now as

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the perfect time to expand their portfolios and take advantage of good opportunities, with more properties available on the market and vendors eager to make a deal.

The pandemic has also curbed people’s spending and provided many with an opportunity to save over the past five to six months. These savings can now be used as deposits for new property investments.

With savings rates so low – around 40% of easy access accounts are earning 0.1% or less – investing in property may be an even more attractive option. Meanwhile, Halifax reported an average rise in property values of 1.6% in the month of July.

CHANGING DEMAND

As the coronavirus remains in the UK and the economy tries to recover, the number of income and job losses has been staggering, and the damaging effect on many people’s livelihoods is hard to witness.

It is difficult to predict how the next six months will unfold, and what new

opportunities will develop for those looking for work.

The impacts of the pandemic may result in people becoming more mobile, perhaps relocating to new areas to gain employment. This could increase demand for rental accommodation from new tenants, including those who don’t want to commit to purchasing property in a different area.

COVID-19 has also had a dramatic effect on workplaces, with an increasing number working from home.

This trend may become the new norm as businesses recognise the potential benefits of home working.

This may also impact on the type of properties that tenants require – perhaps seeking extra rooms to accommodate a home office.

What is clear is that as we recover from the impact of the pandemic, tenant demand for rental property remains strong and that landlords are keen to grow their property businesses, which provides an excellent opportunity for intermediaries to support their buy-to-let clients. M I

There are encouraging signs for the recovery of the buy-to-let market

MORTGAGE INTRODUCER SEPTEMBER 2020

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BUY-TO-LET

Buy-to-let investment in London is falling Richard Rowntree managing director of mortgages, Paragon

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o other rental market has been more buffeted by the events of the past few years than London. A combination of the introduction of the stamp duty surcharge, high property prices and Brexit have taken their toll on buy-tolet investment in the capital.

Official data shows that the number of buy-to-let loans for new property purchase in greater London was 50% lower last year than in 2015, before the 3% surcharge was introduced.

Of course, other regional markets have also been hit, but none greater than London.

The market was certainly showing signs of stability in the first quarter of this year, but the impact of coronavirus will probably be felt more acutely in the capital.

According to Hamptons International figures, supply in London has been flooded by the collapse of the shortterm lettings market.

Faced with a shortfall of tourists looking to rent their properties, AirBnB operators have been turning to the long-term rental market.

Figures from August show that two in five homes which had been advertised as a short let are now being offered for long-term occupation, and rental supply is up 25% across London, rising to 42% in central postcodes.

This is putting downward pressure on rents in the capital – down 4.2% yearon-year in July and 8.4% in central areas specifically.

Landlords with good quality tenants in place will be working hard to keep them, and those looking for new tenants will face stiff competition. www.mortgageintroducer.com

At times like these, thinking tends to focus on the short-term, but it’s the long-term picture we need to consider.

Coronavirus will undoubtedly change the way we live.

But tourists will eventually return to London’s streets, office workers will be back at their desks and people will continue to be drawn from all over the world to live and work in our great capital, with its fantastic nightlife, restaurants and theatres.

UNDERSUPPLY

It seems absurd to talk about undersupply at the moment, but the short-term lets that have hit the market will eventually subside.

Prior to the pandemic, the supply of rental property in London was at a two-year low and the impact was starting to be felt. Rental inflation was starting to inch up in most boroughs.

The stamp duty holiday will benefit those buying in the capital more than other markets due to the high property prices – landlords could save up to £15,000 in stamp duty – and will no doubt stimulate fresh investment in the capital over the next six months However, London’s private rented sector will need more encouragement to meet the future requirements of that vibrant and transient city.

London will return to its vibrant past

Patience in an uncertain world Moneyfacts issued figures towards the end of August which revealed the impact of coronavirus on buy-to-let mortgage product availability.

Their data showed that there are around 1,200 fewer mortgages than at the peak in March (although it could be argued that we were reaching the point of oversupply) and that average rates have been creeping up during August.

The daily alerts from the mortgage press show that products are being withdrawn at short notice and criteria constantly changed.

For brokers and their customers, it must be a difficult and frustrating time, creating a ‘here today, gone tomorrow’ environment as lenders tackle their own set of issues. At Paragon, we have tried to be consistent, making changes to our criteria early in the pandemic and streamlining our product line to focus on our core offering.

We haven’t tinkered around the edges as we try and manage business flows, and we focused on getting ourselves in order operationally.

However, competition in the sector is welcomed and encouraged, and having a healthy availability of products is important as demand from buy-to-let landlords is strong at present, driven by good levels of tenant demand and, of course, the stamp duty holiday.

By the time you read this, Q2 buy-to-let lending figures should have been released. We forecast that the overall market will be down by slightly under 10% for the first half of the year compared to 2019. Whilst painful, that is understandable considering the difficult quarter the industry has just endured. Whether the sector can catch back up again in the second half of the year has yet to be seen, but there is far more positivity around than in those early days of the pandemic. What will help the market recover, however, is consistency and clear communication between lenders and brokers. M I

SEPTEMBER 2020 MORTGAGE INTRODUCER

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BUY-TO-LET

The sector is in a strong position Ying Tan founder and chief executive, Dynamo

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s we now enter what is traditionally a busy preChristmas period (did I really just say that word?), data is emerging which outlines activity levels over the summer and shows how the buy-to-let (BTL) market, landlords and tenants have reacted to lockdown.

DEMAND

Focusing on the BTL sector, according to the ARLA Propertymark Private Rented Sector report, the number of new prospective tenants continued to rise during June, following the COVID-19 lockdown.

It revealed that the average branch registered 79 new tenants, compared to an average of 70 in May. Year-on-year, this figure was the highest recorded for the month of June, with a previous record of 71 in June 2019. However, this is still down on pre-lockdown figures, as an average of 82 prospective tenants were registered per branch in February.

Similarly, the number of rental properties on the market continued to pick up. The number of properties managed per branch reached an alltime high for the month of June, at an average of 200.

This was down slightly from the 208 recorded in May, but still set the market up for an active summer compared to the usual seasonal lull.

Regionally, Yorkshire & Humberside saw the highest number of properties managed, with an average of 264 per branch. Branches in Wales had the lowest number, with an average of 104.

The number of tenants experiencing rent rises increased in June, with 295 agents witnessing landlords making increases. However, this was still the lowest number for the month of June since 2016.

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MORTGAGE INTRODUCER

The UK rental market’s ‘summer boom’ continued throughout July, with rents up and voids down, according to the latest Rental Index from Goodlord.

Average rents rose in six out of the eight regions monitored, including a rise of 22% in the North East and 17% in the East Midlands. Greater London and the South East increased by 3% and 7%, respectively, and the only region to see a fall was Wales, of 5%.

Overall, all eight regions recorded higher rental rates in July than their 2020 average to date. All also saw a decrease in void periods, thanks to ongoing demand, while the UK average void dropped from 23 days to 16.

These figures helped outline that the expected post-lockdown bounce was not just a flash in the pan.

PRODUCTS

A recent report from Moneyfacts highlighted that BTL product choice reduced month-on-month at the start of August, with a fall of 78 products since the start of July.

At the time of writing, product numbers were reported to sit at 1,660.

However, on a more positive note, this reflects an improvement compared to the 1,455 deals available on 1 May. In addition, the average 2 and 5-year rates for all loan-to-value (LTV) brackets are lower now than they were at the start of the pandemic, down 0.05% and 0.13% to 2.72% and 3.11% respectively compared to 1 March.

We’ve seen many BTL lenders reenter the market, refresh their ranges and resume lending for first-time landlords, as well as extending limited company offerings.

Inevitably, the intermediary market and landlords were starved of choice over the first few weeks of lockdown, but the sector has reacted swiftly and responsibly to generate more options in recent weeks. I fully expect this positive forward momentum to continue.

SHIFTING TENANT PRIORITIES

That’s not to say challenges don’t still exist within the lending community.

SEPTEMBER 2020

We – as an industry – have to form a better understanding of how people’s property-related requirements have shifted as a result of lockdown.

Changing circumstances when it comes to employment, income and future prospects will undoubtedly have a bearing on homeownership aspirations and their timings.

So, will this lead to even more people becoming reliant on the rental market?

This is the big question landlords are currently asking, and it could well be the case when you consider what continues to be a highly uncertain economic landscape.

Priorities are also changing for landlords and tenants, with more people focusing on properties with gardens and space to work.

Research from BVA BDRC and Paragon showed that a fifth of landlords said a property with a garden was top of their tenants’ list of requirements in response to coronavirus, followed by space to enable them to work from home (15%) and a fast broadband connection (12%).

The research also revealed that 36% of landlords looking to acquire new property over the next 12 months would target a semi-detached house, up from 33% last year. 12% said they would target a detached house, compared to 9% in Q2 2019, while demand for terraced housing remained steady at 50%.

Additionally, landlords with larger portfolios are more likely to find that tenants are demanding outside space. Just under a third of landlords (32%) with 20-plus properties in their portfolio said that tenants were prioritising outside space, falling to 20% for those with two to three. �uestions over what we now require from our homes – whether as a tenant or homeowner – continue to be raised.

Thankfully, the BTL sector is now in a much stronger position to provide the type of solutions and support to help landlords and their tenants successfully navigate this tricky period. M I www.mortgageintroducer.com

always offer our customers a great deal each year

Renewals will now be rebroked by searching and comparing premiums from our panel of leading UK insurers.

If another insurer is cheaper, we will offer your clients the opportunity to switch to that insurers new business price at renewal.

You can be confident your clients will always be offered a great deal alongside 5 Star Defaqto and Moneyfacts rated cover.

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PROTECTION

How does indexation really work?

Kevin Carr chief executive, protection review, and MD, Carr Consulting & Communications

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he way insurers price indexation has changed over the years, and costs may vary from one insurer to the next.

Index-linked protection policies pay an amount that increases either by a fixed amount each year, or typically the retail price index (RPI), so that the amount of cover maintains its real value in future years.

Most insurers increase cover based on RPI, but the cost is often subject to a higher increase, typically 50% higher depending on the insurer. As an example, this means that an initial £13pm could rise to £18pm after five years, £54pm after 20 years and £159pm after 35 years, and so on.

While most insurers state these increases either in the quote or the product terms and conditions, some currently don’t confirm how much the future cost will be, although they do say the new price is communicated every year in writing, and that policyholders can choose whether or not to continue.

How clearly this is communicated to the adviser and client depends on the insurer. Sometimes it is clear from the initial quote, sometimes in the policy document, and sometimes you might have to contact the insurer directly.

Insurers say the higher costs are because the amount of cover is increasing every year while the client is getting older (and without any new underwriting) which is fair enough.

Clients could take a larger amount of cover at the outset, which stays the same, which could prove to be better value in the long term.

Either way, it is important that advisers, compliance directors and

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customers all understand exactly how the price and cover will change in future years.

THREE WAYS TO START A PROTECTION CONVERSATION

“If you could legally build a machine that prints money every day would you insure it against breaking down?”

Most, if not all, people will say yes to this question. The response of course is that they are the machine.

A more formal approach might be to expand on the client’s incomings and outgoings, which will often already be known for mortgage purposes, and ask about their views around sick pay, savings, future career, family plans and whether or not they have any other financial safety nets.

And while there are many others, a third way might be to ask the customer which they prefer: the cheapest life insurance, or the best.

This is quite different from asking if they want protection, and usually triggers a response around ‘what’s the difference?’ which should be music to an adviser’s ears. M I

NEWS IN BRIEF New protection sales through iPipeline via protection call centres have seen a 9% increase in like-for-life new business year-on-year in Q2. However, mortgage brokers were the worst hit sector, with a 23% decrease in new protection business over the same period.

Aviva has launched a new service to support income protection claimants who are suffering from long-term ill health as a result of the COVID-19 pandemic, including vocational case managers to support customers who are dealing with the long-term effects.

Zurich paid out over £154.2m in life insurance claims during H1, compared to £140m in 2019. Over £15m worth of COVID-related claims were made on life insurance policies.

New figures from the ABI show that insurers received nearly 7,000 life insurance claims and paid £90m to support families of people who passed away due to coronavirus between March and May this year.

The number of house sales reliant on funds from the ‘bank of mum and dad’ will rise from 19% to 23% according to new research from Legal and General.

UnderwriteMe has announced that Caspian Insurance is the first adviser firm to access its Protection Platform by application programming interface and integrate it into its own customer relationship management software.

The Income Protection Task Force is looking for a new chair after current co-chairs Roy McLoughlin and Kevin Carr announced they would be stepping down at the end of the year.

Life insurance: cheapest, or best?

MORTGAGE INTRODUCER SEPTEMBER 2020

Guardian has recruited Hilary Banks, current divisional director at Vitality, to the role of sales director. The protection challenger has also appointed Jacqui Gillies, marketing and proposition director, to its executive committee. Both will be reporting to CEO Katya MacLean.

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PROTECTION

The importance of choice in this time Jeff Woods campaigns and propositions director, Sesame Bankhall Group

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he issue of choice in the protection market has never been more important than right now, but why?

The impact of COVID-19 has put our profession in unchartered territory, and this extends to the protection market. Providers are changing their underwriting criteria on a regular basis.

They are also taking different approaches, so greater choice improves the chances of being able to give customers the best outcome.

value their cover, the more likely they are to retain it.

It’s also important for advisers to appreciate that more choice doesn’t mean more complexity.

CUSTOMER RELATIONSHIPS

they were intended for, with standard pricing that is fair and not influenced by any commercial arrangements.

This was a message, alongside that of their desire and appetite for choice, that we received loud and clear in research and insight work undertaken with advisers.

This has never been more important than right now, given the ongoing issues around underwriting exclusions and deferments.

Thankfully, the solution is simple: if you want to make sure that you give your customer the best possible outcome, then choice is essential.

Just as important is the need to make sure that the customer understands and appreciates that they’re getting really good value. The more that customers

Most advisers will have access to one sourcing system that does it all.

There’s no need to flip between panels or go direct to a provider’s extranet, because everything advisers need is in one place.

Furthermore, there’s plenty of training and education support from networks, mortgage clubs and providers to help along the way.

Greater choice also provides an opportunity to drive more interest in product areas, such as income protection and family income benefits, which tend to be discussed less often by some advisers.

And let’s not forget that offering a wider choice of solutions to advisers is an opportunity to drive deeper customer relationships and ultimately future-proof your business. M I

HEALTH MATTERS

This issue particularly affects any customers who might need to provide additional medical evidence, or who have some form of health impairment.

In the current climate, these customers potentially face more exclusions and deferments, along with extra underwriting questions.

The problem for advisers and their customers is that this will inevitably vary from provider to provider; hence why choice is needed more than ever, because an adviser is increasingly likely to require access to a variety of providers in order to secure the best terms possible. The wider the range of providers and products to choose from, the higher the chances of success.

So, if an adviser doesn’t have access to a provider offering attractive terms because, for example, they are working from a restricted panel, then this could pose a problem. This is why working from the widest choice possible in the current environment is so important.

At the same time, it is important to offer products that offer good value for the customer, meet the target market www.mortgageintroducer.com

Having a wider choice of solutions can drive deeper customer relationships

SEPTEMBER 2020 MORTGAGE INTRODUCER

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PROTECTION

Grim statistics Steve Ellis head of risk and protection, Premier Choice Group.

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he coronavirus pandemic is pervading all aspects of our lives one way or another.

Inevitably, that includes the ways we are protecting ourselves financially, or have been attempting to.

While protection in case we lose our job or income is one thing, protection for family and dependants if lives are lost is also highlighted, where life cover is not in place.

If you have clients who argue that insurance doesn’t pay out, these statistics from the Association of British Insurers (ABI) may help: According to the ABI, insurers have paid out £90m to help families cope with coronavirus deaths.

This is the equivalent of 77 claims, or £980,000 a day, paid in death claims during the peak of the crisis.

LIFE INSURANCE CLAIMS

There were 7,000 life insurance claims for deaths related to COVID-19 made in the period between 1 March and 31 May this year.

The association lists that 6,689 claims were received under individual protection policies, with 351 under group schemes, also including a small number of critical illness and total permanent disability claims.

The ABI says that the vast majority of these claims (83%) have been paid so far, meaning that these figures demonstrate that every life insurance claim has so far been accepted.

The average payout on term insurance is expected to be £63,000, with an of £137,000 on group policies.

These amounts could be useful to families; they could solve some financial headaches around the clear heartache of losing a loved one.

However, these are not huge amounts – most would not clear a mortgage.

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It is imperative – unless there is some other means of clearing a mortgage in the case of a death where dependents are left – that the amounts that individuals or couples are insured for is seriously reviewed.

It won’t make a huge difference in the premium amount when balanced against the huge difference it would make if the bread-winner or the person who looks after the home and kids dies.

CHARITABLE SUPPORT

For those really struggling because of loss of income, there are charities that can help. No one should be reluctant to get in contact.

“There were 7,000 life insurance claims, for COVID-19 related deaths made between 1 March and 31 May this year” And for those who – often with reason – slight the insurance industry, let us remember that the UK insurance and long-term savings industry launched the COVID-19 Support Fund. This is aiming to raise £100m, and has already had £83.9m pledged by voluntary contributions from within the sector to support those who have been hit hardest by the crisis.

The fund is working with the Charities Aid Foundation and a network of partners, including the National Emergencies Trust and Business In the Community (BITC).

The key aim is to provide immediate relief to charities affected by COVID-19, as well as a longer-term programme of support for people, communities, and issues where there is the greatest need.

This includes community-based charities that are under unprecedented strain; charities supporting the most vulnerable – in particular, families and children living in poverty and older people in isolation; and initiatives to

MORTGAGE INTRODUCER SEPTEMBER 2020

promote wellbeing and mental health across society.

If you have clients who are struggling, help them along to these points of support, where available.

Sometimes – and particularly at this time – it’s about going beyond the pure course of business.

SELF-EMPLOYED NOT SELF-PROTECTED

The self-employed go through more hoops and hurdles in securing mortgages than most, and many have found that the various recent government support schemes haven’t been there for them.

It doesn’t help that, according to The Exeter, 14% of self-employed workers have less than £2,000 in savings, 17% have none to fall back on if they suffer an income shock, and only 9% protect their income through insurance.

Only half of the five million selfemployed workers in the UK claimed for a grant through the government’s Self-Employment Income Support Scheme (SEISS) – 2.7 million claims were granted, amounting to £7.8bn.

The second stage of this scheme has opened, but we know many who failed at the first hurdle won’t do any better at the second, and many who got something first time around may not in the second wave.

Add to this other figures the Exeter highlights, which show that 65% of the UK adult population do not have any form of protection insurance in place.

This offers an enormous opportunity to address the protection gap.

However, I fear it will do little to help those without insurance now, and it may be some time before adequate cover will be available.

But this salutary lesson will unfortunately stay with many. Let us help them help themselves just as soon as they can.

Any healthcare and protection intermediary will work with you and your clients to find insurance, as the market emerges from this pandemic and its effects. M I www.mortgageintroducer.com

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PROTECTION

Life industry passes its ‘Acid Test’ Mike Allison head of protection, Paradigm Mortgage Services

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e often spend an inordinate amount of time and effort making sure we have done things correctly in our industry.

When it comes to the job of an adviser involved in protection sales, they have to, quite rightly, asses the client and try to best match products and services to meet their needs, taking into consideration varying degrees of product and underwriting differentials between a host of insurers, as well as considering the factors of price and affordability, of course.

They will spend some time justifying their decisions, in addition to collecting evidence in the first place. Ultimately, though, the ‘acid test’ is the payment of claims.

Time and again we see surveys of the public where they cite the reason for not taking out insurance (and I use that generalised term loosely) as their belief that the insurer will not pay out.

We all have our views on how the media have reported the pandemic in the UK, and I genuinely have not heard too many people saying positive things.

Recently, I saw the BBC highlight the non-payment of a Business Interruption Policy because the insured was unable to operate from his premises as a result of COVID-19, which was clearly not what the original policy was designed for.

Then we look at the value that the life industry has added to scores of lives over this distressing time. We do not appear to shout about it enough, nor do we make the clear distinction on life and critical illness (CI) pay outs as opposed to general insurance (GI).

According to the Association of British Insurers (ABI), during the height of the crisis, insurers received nearly 7,000 life insurance claims and

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paid £90m to support families of people who passed away due to coronavirus.

In detail, the figures show that from March to May this year, 6,689 claims were received under individual protection policies, with 351 claims under group schemes. To reinforce the point: every claim has been accepted.

As is becoming the norm with individual and group policies, the support given to families does not stop there. Most policies offer access to some form of bereavement counselling.

This should not be under-estimated as beign of real value to people, especially in circumstances where there is no extended family to support those who are most directly affected.

WAITING LISTS

We know that the pandemic has left the NHS with a huge backlog of patients with physical conditions; indeed, the latest figures indicate that it now faces an unprecedented backlog of an extra several million patients, on top of the record 4.5 million on waiting lists before the pandemic.

Indeed in the recent round of results reporting, most insurers have already started to reserve tens of millions for the impact of future claims as a result of policyholders not seeking medical

The life industry has provided much needed support

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advice during lockdown, either through reluctance to visit the doctor, or the physical problems in doing so.

But these figures will pale into insignificance when it comes to the support needed in the mental illness sector, especially compared to the number of specialists available to support those who need help.

The Office for National Statistics (ONS) reported recently that almost one in five adults (19.2%) were likely to be experiencing some form of depression during the COVID-19 pandemic in June 2020. This had almost doubled from around one in 10 (9.7%) before the pandemic (July 2019 to March 2020). The strain on any sort of specialist mental health support will continue to be there for all to see.

Further help for clients with life policies will have come from those insurers that have signed up to the Funeral Pledge. These insurers will have supported families in paying up to £10,000 out of the life assurance directly to the funeral directors to save already hard-hit families having to find the money.

In addition, the industry has been party to the development of a COVID-19 support fund to provide relief to charities and community initiatives affected by the coronavirus pandemic. A huge £82.5m has already been pledged, out of a target of £100m.

Just as the industry is providing additional supports as part of the increasing value-add services – thereby taking some of the burden away from the NHS – the charity will support community-based initiatives that are under huge strain, like those supporting the most vulnerable. The focus will be on those families living in the greatest poverty, and older people in isolation.

There may be some debate as to why certain GI policies have paid out, both recently and in the past, but the life insurance industry has a lot to be proud of, and should shout it from the rooftops itself, as some parts of the media only seem to want to report less than good news. M I www.mortgageintroducer.com

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PROTECTION

Income protection: In the sick of it Paul Yates product strategy director, iPipeline

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s summer slowly ebbs away and we look towards autumn, we still do not know what the future will bring for the mortgage market.

As hard as I try and polish my crystal ball, the picture stays firmly hazy.

In the same week that a headline shouts ‘Summer housing boom may not last’, we conversely have one that declares ‘Remortgage potential for brokers as two thirds of property owners want to make home changes’.

REIGNITION

It seems the government’s aim to reignite the housing market through its stamp duty holiday has certainly worked, at least in the short-term.

Rightmove’s latest house price index revealed the highest number of monthly sales in more than 10 years in August, up by 20% on the previous high, and with a record total value of over £37bn.

At the same time, a survey by Aldermore Bank indicated that lockdown has motivated people to make home improvements, with 70% saying they want to make changes as restrictions ease. The market is now speculating that this could result in a remortgage mini-boom.

However, despite these positive signs, one thing our history of ups and downs has taught me is that recovery is not going to be simple and straightforward.

2019 was a stellar year for income protection sales through mortgage brokers, with our statistics showing that new business increased by 54% year-on-year in Q4. This year, unsurprisingly considering the freeze in www.mortgageintroducer.com

the mortgage market as a consequence of the pandemic, mortgage brokers have been the hardest hit channel for all protection sales.

Our Q2 statistics revealed that they saw a 23% decrease in like-for-like new business year-on-year, followed by wealth independent financial advisers (IFAs) at a decrease of 16%, and general IFAs at 8% decrease.

Call centres were the only channel to see an improvement, with a 9% increase in new business.

“Considering the quantity of first-time buyers, the number of income protection policies looks anaemic” While I am confident that protection volumes will improve through Q4 and beyond (as long as there are no further economic shocks or lockdowns on the horizon), to really drive sales and pick up where they left off at the beginning of this year brokers should continue to focus on delivering great holistic service and ensure they keep talking to their clients.

Income protection policy volumes look sick

It is this continued client engagement that will enable them to thrive and survive in the current market. We need to demonstrate to clients that we have their financial futures at the heart of what we do.

As such, we must discuss their continued financial resilience alongside arranging mortgages, as much as some people do not want to hear it. We have got to show clients the risks they face when they are not properly protected – not just from dying or having a critical illness, but also from illnesses that prevent them from working.

IMPORTANCE OF INCOME PROTECTION

When I look at industry statistics, I’m always surprised about the number of income protection sales versus term and critical illness policies issued.

Swiss Re’s Term & Health Watch shows that there were 1.6 million term policies and over 0.5 million critical illness policies sold in 2019, but only 179,000 income protection policies sold (which was a tremendous 20.9% growth on the previous year).

Considering the quantity of firsttime buyers, the number of income protection policies looks anaemic.

Factoring in the scale of underinsured residential homeowners who talk to brokers about remortgaging every year, it looks plain ‘sick’ – even though product choice and quality has improved immeasurably.

At iPipeline, we have helped firms redress the balance. We use mortgage, remortgage and income protection risk reports, nudges and targeted email campaigns to help brokers kick off fuller protection conversations.

These initiatives are used with first-time mortgage and remortgage clients and, importantly, they are also targeted at books of existing clients. In fact, 40% of existing clients contacted wanted a fuller conversation, and half of these bought added protection.

These initiatives have proven that clients want and appreciate these protection conversations. They have also had considerable financial success.

At a time when we could all do with good news, it proves that doing the right thing is…the right thing to do. M I

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GENERAL INSURANCE

Agility is key to digital innovation Rob Evans CEO, Paymentshield

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n both cultural and business contexts, flexibility has become the catchword of the COVID-19 crisis.

With instability in the mortgage market and an ever-changing set of customer needs, creating and rapidly implementing solutions to near-daily obstacles has become a necessity.

Even though the pandemic has pressed pause on many aspects of modern life, it has undeniably expedited others – the adoption of technology being a critical example.

Providing value to customers at pace is arguably the biggest challenge facing advisers right now, and at Paymentshield, we believe the solution lies in the Agile approach.

As an adviser-led and digitallydriven company, Paymentshield understands that agility is more than just the latest fad; it’s a culture which, if successfully nurtured, incubates digital innovation and revolutionises change delivery within technology, as well as the broader business.

The Agile philosophy overarches many methodologies, but essentially focuses on incremental work sequences and frequent review and testing to enable businesses to manage unpredictability and respond to change.

It creates a working environment in which people, solution quality, and speed to market can all grow.

What’s more, since Agile is end-user focused, the advisers we work with get to quickly see the benefits of these technological developments.

At Paymentshield, this includes our suite of application programming interfaces (APIs) with e-Keeper and LexisNexis, which use pre-captured

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client information to enable advisers to seamlessly and flexibly integrate tailored general insurance (GI) quotes into their advice process.

This is well worth tapping into, as our research revealed that brokers lost out on £47.8m in commission through missed GI sales in 2019.

ADVISER HUB

By focusing on the development of digital tools, Paymentshield has been able to quickly make additions and enhancements that help advisers to develop their business and provide the best possible client experience.

Take our Adviser Hub: the platform organises customer information to deliver a depth of personal analytics that empowers advisers to make dataled decisions.

Throughout its creation and ongoing development by our 50-strong technology team, we involved our intermediary customers to truly understand what they need.

Since its launch, we have seen a 25% increase in quotes, a 17% increase in submissions, and a 20% increase in completions. In the current climate, a commitment to listening to clients’ changing priorities and adapting accordingly goes a long way.

The majority of businesses start and end with applying Agile to software development, but adopting its principles beyond this can help businesses, and advisers, flourish.

By working in iterations, for instance, change becomes part of the proposition’s journey, allowing advisers to respond sensitively to shifts – minute or major – in the mortgage ecosystem.

This can be seen, for example, in the context of the recent decline in origination: those advisers who constantly reflect on their existing practices and embrace flexibility can seize this change as an opportunity to diversify into remortgage sales, making

MORTGAGE INTRODUCER SEPTEMBER 2020

the most of Paymentshield’s 22% discount for remortgage, equity release, and product transfer clients as a result.

Like the Agile method, advisers should benefit from the consistent review of their offerings, as it allows them to evaluate their progress and calibrate their approach to align with new circumstances.

In essence, it is about advisers striking a balance between continuing to run their business and seizing opportunities for growth, such as general insurance.

Agile centres around delivering the best possible value for customers. For advisers, this must involve tailoring their service to heed clients’ individual and evolving needs.

Conversation is central to this. Just as communication and review are key Agile elements – ensuring engagement across teams for the benefit of customers – fostering meaningful relationships with clients will always be a differentiator between advisers and online price comparison sites, where the budget products are often unsuitable and can expose customers to risk.

It comes full circle: advisers not only benefit from the technological innovation a provider’s Agile approach affords, but by embedding its principles into their own working practices they can also continue to deliver value in today’s times.

Companies with an agile culture – those which embrace, adjust to and mobilise change – have the operational resilience and adaptability that can convert current upheavals in the financial market into opportunities.

In such an increasingly competitive environment, where it is becoming more difficult for brokers to stand out from the crowd, an Agile approach promises to be a spur to growth.

When applied to both developing tech capabilities and beyond technological contexts, agility fundamentally supports businesses and brokers to respond efficiently, sensitively, and at pace to customers’ vastly evolving needs.

While technology is undoubtedly an asset, agility is by no means just for technology business. M I www.mortgageintroducer.com

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GENERAL INSURANCE

GI is on the up Geoff Hall chairman, Berkeley Alexander

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s I write, the housing market is up and so too is insurance demand. According to the latest Royal Institution of Chartered Surveyors (RICS) survey, housing demand rose for the second month in a row in July.

Rightmove reported that buyer enquiries were up by 75% in July compared to the same time last year, and half the properties listed in May had already been marked as sold.

Asking prices were also up by 3.7% on the previous year.

The market has also seen higher loan-to-values (LTVs) and more lenders restoring lending on holiday lets. Similarly, general insurance (GI) enquiry levels have continued to rise, and I’m pleased to say are higher than they were at the end of last year.

As well as GI sales on new mortgage business, one of the main reasons for this increase is the volume of businesses coming back online post-lockdown.

Commercial policies in particular have seen an uptick in new enquiries, as businesses all over the country and in every sector urgently need to reinstate or renew policies that have lapsed or been cancelled.

The positivity in the market is always welcome news, but history and experience tell us that when mortgage business picks up there is a risk that advisers make the mistake of thinking they are too busy for GI. No one knows what’s around the corner in these unprecedented times, or how long this property ‘boom’ will last, but be under no illusion: those who have diversified their product range and taken a holistic approach that includes GI as part of their core business will fare far better during a recession.

Every month delivers a valuable recurring income from GI, hitting www.mortgageintroducer.com

the bottom line from previous sales of home, landlord, commercial, nonstandard, high-net-worth (HNW) and all other insurances.

EXPLORE NEW INCOME OPPORTUNITIES

The situation with COVID-19 has given rise to demand for more traditionally niche areas of insurance.

As an adviser, if you have a thorough understanding of your existing book, there will be opportunities to find avenues to cross-sell services and add value, particularly in these lesser known niche areas.

It’s not necessary to be an expert in niche lines – the trick is to partner with a GI provider that has that expertise.

“History and experience tell us that when mortgage business picks up there is a risk that advisors make the mistake of thinking they are too busy for GI” One example we are seeing a renewed demand for is Advanced Performance Bonds.

These are used in big contracts or projects where the end client is making significant payments in advance for goods or services, or where a failure of the firm mid-contract will leave the end client with an increased bill to see the work through.

In the current climate – with a higher risk of insolvencies – this leaves clients unusually exposed, hence the rising demand for this type of insurance.

Another opportunity has arisen due to the relaxation of planning rules.

The planning reforms will see a much higher demand from clients for home extensions or self-build projects – and with the latter, a demand for National House-Building Council (NHBC) style warranties. This doesn’t have to be via the NHBC – it can be purchased as

an insurance backed guarantee from specialist providers.

So, be alive to the opportunity and add value to these clients with the appropriate advice and cover.

Fully understand the opportunity of your existing book and look at your clients’ profiles for targeted cross selling where appropriate.

Your customers will welcome a fresh look at their insurance needs, so it truly is a win-win.

AFTER 1 SEPTEMBER IS HOME INSURANCE VALID?

A recent article by The Independent, claimed that millions of the British public are at risk of invalidating their home insurance if they choose to continue working from home after 1 August, as the UK government further eases lockdown rules to encourage people to return to the office.

Research published in the article, carried out among 2,000 consumers, found that 26% planned to continue working from home on a permanent or semi-permanent basis as the coronavirus lockdown lifts, but seven in 10 were unaware that they may need to inform their insurance provider of their change in circumstance.

More than half surveyed confessed to confusion about how working from home could impact their policy.

Early on in lockdown, the Association of British Insurers (ABI) clarified that customers would not be required to inform their insurer if they worked from home while government advice was to do so.

Of course, this government advice has since changed; however, as yet there has been no further clarification from the ABI. The bottom line is that if clients are still choosing to work from home – and particularly if they are receiving visitors to a home on business matters – this is currently a grey area.

You should check with the insurer or your general insurance provider on a case by case basis, until there’s further clarity from the ABI. M I

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TECHNOLOGY

Second wave means electronic ID is a must John Dobson chief executive, SmartSearch

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ven as the country gradually emerges from the COVID-19 lockdown, we have seen some restrictions reimposed in various places, in response to a fresh spike in cases.

Now, there is increasingly talk of a second wave of coronavirus spreading across Europe, and it is hard to imagine the UK will manage to avoid it, even with tighter quarantine measures being put in place.

This strongly suggests that it is premature to think in terms of lockdown being over.

Businesses need to be prepared for the possibility that there will be further restrictions, and plan for continuity under those circumstances.

still delays in the Passport Office and DVLA issuing renewals, as they work through the backlog of cases that built up during lockdown. This means that some prospective clients may no longer have valid ID in the first place.

The threat of money laundering has not gone away because of COVID-19; in fact, as many organisations involved in the fight against organised crime have pointed out, the crisis is likely to increase that threat.

CONTINGENCY PLANS

If we do go into lockdown again, regulators are likely to be less forgiving the second time round of those firms that have not made a proper contingency plan.

Put simply: there is no reason why lockdown should prevent firms operating secure and fully compliant onboarding processes.

In fact, digital onboarding – with identity verification being carried out remotely – is much more reliable than document-based approaches, and is also more efficient for firms.

In 95% of cases, a positive ID match can be made in just two seconds, with just a name, address and date of birth.

DIGITAL EFFICIENCY

Where a passport or driving licence is available, this can be authenticated, and biometric facial recognition carried out, and this, too, can all be done remotely from the client’s smartphone or other device. This makes it highly convenient for customers – and also more efficient for firms.

Even without the ongoing threat from COVID-19, it is hard to understand why there are still so many firms clinging to outdated and inefficient document-based approaches to ID verification and client onboarding.

With the threat of the pandemic – and the prospect of further lockdowns – likely to be with us for some time to come, it makes sense for firms to explore as a matter of urgency the more sophisticated digital processes available MI to them.

MANUAL PROCESSES

The initial lockdown made it more or less impossible for firms to take on new customers while continuing to rely on manual processes involving physical documents – such as passports or driving licences – for the purposes of identity verification.

It was impossible to meet clients in person, and with staff working remotely it was neither secure nor practicable to arrange for sensitive documents to be exchanged by post or courier.

Given the suddenness with which lockdown descended, regulators were willing to cut firms a bit of slack in how they responded to this, and various workarounds were permitted.

I argued at the time that this was risky, effectively giving a green light to potential money-launderers, and it is clearly not a sustainable answer. As has been widely reported, there are

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We must be prepared for a second wave and embrace digital solutions where possible

MORTGAGE INTRODUCER SEPTEMBER 2020

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EQUITY RELEASE

Tomorrow’s home finance customers Alice Watson head of marketing and communications, Canada Life

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roperty is usually an individual’s most valuable asset. As more look to boost their retirement income, the flexibility and certainty of home finance products means they can be tailored to meet evolving needs.

As these grow in popularity we expect a new wave of customers to come through.

It is important to understand what drives homeowners to release equity, and to understand the different profiles we are seeing emerge.

With people living longer and retirement likely to last several decades, many of us will have to pay for later life care at some stage, whether for ourselves or our loved ones. With rising costs and growing demand, it has become harder for many to afford.

If possible, an option may be to convert their main residence into a rental property, making them eligible for a later life buy-to-let mortgage.

These innovative products allow individuals to release a lump sum from their property without having to sacrifice ownership, and without having to meet minimum income requirements. The money can be borrowed in instalments or as a lump sum, and is received in addition to the rental income. This brings priceless peace of mind to a family, who can

meet the cost of care without selling a valuable asset.

Location can make or break a property, and that doesn’t diminish as you get older. Perhaps an escape to the country felt like a dream, but now being closer to essential amenities and less reliant on driving is better.

Some may also want to be closer to grandchildren and benefit from a greater support network.

Well-connected properties will often command a higher valuation and may price people out of the market. For some, a lifetime mortgage could help to cover the shortfall.

In some cases, home finance can be used to add value. A property with less than 75 years left on a lease is likely to see its value fall compared to a similar one with more than 100 years left. In these cases, a lifetime mortgage can be useful. By using the money released to extend the lease, the value is boosted.

This is far from an exhaustive list, but highlights how home finance products can be used in an innovative and flexible way. M I

REVIEW

EQUITY RELEASE

Getting the message across Stuart Wilson CEO, Air Group

T

wo pieces of research caught my eye recently, because from my perspective, they appear to sum up where we are as an equity release and later life sector, especially when we look at how products can be utilised to provide valuable solutions to older homeowners.

First up is a survey by OneFamily, which looked at how COVID-19 might have impacted on families, their finances and what they may now be required to do, particularly when it comes to supporting family members.

A fifth (20%) of those considering equity release were now more likely to take out a product as a result of the pandemic, while 69% of over-55s said they had given financial handouts to family members in the past.

The research also highlighted the situation that ‘sandwich’ households find themselves in – namely that of looking after both elderly parents and adult children – and the finances required to continue doing that.

Understandably, in such situations and many others, equity release may be a solution, but as other research from Age Partnership highlighted, equity release product knowledge amongst the over-55s is perhaps not what we would wish it to be.

The research revealed that 66% of respondents don’t know the meaning of the ‘no negative equity guarantee’, 54% don’t know how interest rates impact equity release plans, and 15% believed they would cease to own their home if they took out a plan.

This will probably not be surprising to equity release advisers who no doubt

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spend much of their time explaining exactly what the nature of the product is, what it means for the individual, how payments may or may not be made, and so on.

Indeed, I suspect if you ask most equity release advisers about levels of client knowledge, then they may respond, ‘T’was ever thus’.

Which perhaps makes that lack of knowledge rather more disappointing, because consumer education has been a core part of the sector’s raison d’être for many, many years.

While we’ve clearly made huge progress in terms of moving equity release away from its niche base and more towards the mainstream, we might have anticipated that the greater conversation and profile around would deliver a better understanding of those product features.

PRODUCT UNDERSTANDING

Again, I fully acknowledge that once clients are within the advice process they receive all of that and much more – helping clients through the journey is what advisers excel at, and clients become comfortable with the requirements of the product and their own responsibilities with it.

However, as the research shows, what we have to try to do here is bridge what looks like a significant gap between need and understanding, because without the latter we are not going to be able to service as much of the former as we would all like.

We know that people do not wake up wanting an equity release product; however, what we should perhaps hope for is that they wake up knowing the equity release option exists and understanding the solution it provides.

Greater understanding is likely to get us greater buy-in to equity release options and facilitate a far greater number of leads to advisers, because it’s likely that homeowners will see that

MORTGAGE INTRODUCER SEPTEMBER 2020

the financial issues they have could be potentially solved by equity release.

It may be too much to ask that advisers have clients who are totally aware of all aspects of an equity release product, including early repayment charges, the greater variety of options available, current rate levels, and so on. But it is not (I think) too much to ask for these clients to know generally how the products in question work,

“With every passing day we have a new generation of potential later life customers” that they are not selling their house, and that they are able to stay in that property until they die or move into long-term care.

If you asked most people how a mainstream mortgage worked, I would anticipate they would be able to reel off a number of key facts.

We as an industry need to work towards a point where those homeowners of a certain age are able to do something similar when it comes to equity release, or indeed, other later life lending options.

That latter point is also an important one, because it probably makes that education and understanding message even more complicated and potentially difficult to get across.

The fact is that homeowners or borrowers may not need to go down the equity release route. They could have something like a more traditional mortgage, or indeed a retirement interest only (RIO) option, which stands in the middle ground.

So, the task is not an easy one – we already know that, as it’s been what we’ve tried to do over the last 20 or 30 years. But this research shows that we can’t stop, nor can we simply assume the message has got through.

With every passing day, we have a new generation of potential later life customers, who now have far more choice than ever before.

Helping them to understand what they can do, and via what means, is a big job, but it’s one that we must all continue to commit to. M I www.mortgageintroducer.com

REVIEW

EQUITY RELEASE

Don’t let remote advice bite back Claire Barker managing director, Equilaw

F

igures published by Key have revealed that the equity release (ER) sector experienced a 27% decline in the number of customers between April and June, as well as a 45% fall in the amount of new equity released, as the impact of the pandemic and a corresponding pressure on services led to significant reductions in custom.

The latest Market Monitor discovered that the number of customers utilising equity release fell by over 3,000 during the second quarter (to 8,374), while the value of new plans dropped from £949m to £521m.

In addition, the total value of plans (including reserved drawdowns) fell from £1.32bn in Q1 to £767m in Q2 as restrictions on travel, labour and building materials constrained the ability to book holidays or pursue home improvements, and customers postponed financial decisions.

Moreover, backlogs and delays in processing applications may have been an exacerbating influence on the figures, with some firms struggling to meet enquiry volumes or adapt to the intensifying role of technology under the conditions introduced in April.

Nevertheless, while the Key figures can hardly be regarded as a cause for celebration, they do reveal some interesting trends and pointers that could help to mitigate the consequences of the pandemic.

For example, the number of borrowers switching to ER mortgages in order to service debt obligations has risen by 7% over the past 12 months (to 44%) and by 2.5% during May alone (according to additional research

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by Equity Release Supermarket) as worsening economic conditions push income amounts to their limits.

Switching to an ER mortgage can allow borrowers to pay off debt by removing the need for monthly mortgage repayments, while also ensuring that properties are protected by the security of no negative equity guarantees – the very definition of peace of mind.

FINANCIAL DIFFICULTIES

With growing numbers of property owners facing financial difficulties, experts have suggested that the ER sector is likely to experience a sharp rise in applications from clients looking to increase income levels, facilitate loans to stricken family members or consolidate debts, and that this demand will grow exponentially as the impact of job losses and economic uncertainty becomes more widely felt.

Indeed, debt advice charity StepChange has warned that job losses in the UK could trigger a significant rise in credit card and utility bill arrears, with British households projected to accumulate debts of £6bn.

In addition, research from investment company AJ Bell has discovered that up to 20 million people in the UK have had to dip into savings or pension accounts since the beginning of lockdown, with 18% of people aged 55 and over and 40% of those between 18 and 34 drawing on these funds.

Meanwhile, an astonishing 10% of Britons have had to take out loans from family or friends, while a further 10% have added debt to credit cards in order to accommodate day-to-day expenses.

Experts have warned that this trend is likely to intensify further once the furlough scheme ends.

Equity Release Supermarket has found that the number of customers choosing lump sum plans has grown rapidly since the start of lockdown (by

MORTGAGE INTRODUCER SEPTEMBER 2020

5% during April and May to 61.2%) as borrowers look to mitigate the impact on savings, pensions, investments and wages, while gifting to children has also risen (by 7.5% to 19.3%).

However, with property owners continuing to experience an unexpected ‘mini boom’ in house prices, experts have also suggested that ER market conditions are uniquely placed to help customers prioritise greater financial support for themselves or family members, with rates on average lifetime mortgage deals having fallen by 0.6% since July 2019 (to 4.27%) and product options having grown from 223 to 355 within the same period (according to Moneyfacts).

Furthermore, the growing flexibility of product options and the ability to make ad hoc repayments on equity loans are seen as supportive of a far broader range of needs and circumstances than older plans, appealing to a wider cross-section of clients and driving up demand.

Evidence from across the ER sector has suggested that an upsurge in customer enquiries has already begun, with recent figures from John Lamb Financial Solutions revealing an astonishing 50% rise in annual demand, and Age Concern reporting a 10% rise in quotations during June compared to February – both encouraging signs.

While there can be little doubt that the sector is in a fantastic position to benefit from a spike in demand, it is essential that we support this by ensuring that high standards of advice and support are maintained, and that clients are protected from the added dangers of fraud or duress, particularly given the emphasis on video calls over the past few months.

In short, we don’t want to end up in a situation where a single-minded reliance on remote advice channels leads to an upturn in complaints, claims or other reputational damage.

Property wealth can play a substantial role in mitigating the consequences of COVID-19, and if we follow these guidelines carefully we can ensure that our sector maintains a profitable edge whilst also helping to change people’s lives for the better – a win-win scenario. M I www.mortgageintroducer.com

REVIEW

CONVEYANCING

The acceleration of technology Steve Goodall CEO, ULS Technology

C

oronavirus has been a truly dreadful event for so many people in so many ways, and the truth of the matter is that until we develop a vaccine it is likely to shape the way we live and work – and the choices we make about where we live – for some time to come.

The consequences will be with us for many years. In the meantime, we are left facing the reality of a new, and very different, normal.

This is particularly true of large parts of the mortgage sector, with service firms forced to adapt.

Working from home, data protection, IT risk, the suitability and availability of broadband and fibre, the network infrastructure in a domestic environment as opposed to a tightly controlled commercial one – this pace of change would previously have been unimaginable. Necessity, as they say, is the mother of invention.

Technology is playing a significant part in helping day-to-day operations get back on their feet, but also in shaping how we are likely to work in the future. It has to.

The newspapers are littered with tales of a housing market back on the up. Property search websites report traffic has boomed over the past two months on the back of easing lockdown and the six-month window to pay no stamp duty on residential purchases up to £500,000.

Asking prices also look much more robust than is usual for the middle of August – when families are traditionally more concerned with summer holidays than trawling through estate agents’ books. This activity is great news, though I remain circumspect about how long-lived it can be.

With a large spike in buyer interest causing a wave of application www.mortgageintroducer.com

processing for both brokers and lenders, technology has to offer capacity, resilience and the opportunity to ‘do things differently’.

Lenders are already struggling to keep up with demand, with their own workforces remotely working and productivity down.

Delays to the time taken from application to decision in principle (DIP) and then to completion are, therefore, inevitable.

CENTRALISATION

Technology can’t solve every problem, but centralising communication and document storage onto one platform accessible by all parties involved in the transaction can reduce the unnecessary weeks that relying on the posting of physical documents create.

Perhaps the biggest investment made so far in the private sector has been the technology to enable employees to work from home. In many ways, this has been life-changing.

Parents are spending more time with children – though, let’s just be clear that it’s not always a party, as juggling home-schooling, cooped up children and restricted space is far from easy.

However, spending more time at home has pushed many people to reconsider their work-life balance, and come out in favour of life.

Given that the working from home genie is now out of the bottle, I suspect I am not alone in believing that more flexible routines are going to become standard practice across our economy.

That is good news for many people in the UK, but it also presents challenges. Of particular importance is the issue of how firms manage their own data and customers’ data outside of the office.

We have all heard the corporate nightmare scenario of the unprotected laptop left on the train.

While a few of us have not yet been back on the train, data protection in a post GDPR world is even more tightly governed. Many details cannot be transferred out of the workplace, even by email.

This type of infrastructural consideration is now really beginning to hit home with firms. It is why investment into technology that creates a highly risk resilient mechanism for data transfer is going to be central to most firms’ business continuity planning for the foreseeable future.

I am of the view that many more forward thinking firms were already moving in this direction of travel, even before anyone heard of coronavirus.

At ULS, we launched our DigitalMove platform almost two years ago, specifically to address this issue of data security – with the added benefit of speed, transparency and an improved customer experience.

This type of technology is the next phase of investment for businesses that have successfully adapted their IT infrastructure to a more disparate and remote workforce. And it’s encouraging for all parties involved in the housing transaction process. M I

Technology can bring speed, transparency and an improved customer experience

SEPTEMBER 2020 MORTGAGE INTRODUCER

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REVIEW

CONVEYANCING

Making the most of adviser demand Mark Snape managing director, Broker Conveyancing

W

e are now seeing a range of second quarter 2020 statistics being dropped into the housing and mortgage markets.

Unsurprisingly, given this period was mostly taken up by the lockdown, the figures we’re being treated to are not exactly positive.

Take recent statistics from the Intermediary Mortgage Lenders Association (IMLA), which looked at a range of adviser data and asked several questions about their outlook and confidence.

Again, it will come as no surprise that just 59% of mortgage offers resulted in a completion during the quarter, compared to 79% in Q1 this year and 85% in the last quarter of 2019.

We might well question what else could have happened when the lockdown was introduced in midMarch and the housing market was only reopened towards the end of May. So, the question I’m asking is what store can we set in these statistics?

Anyone working in the sector during this period will have known exactly what the situation was, and understood the diminished likelihood of getting clients through to completion when so many parts of the process were either working remotely, furloughed, or unable to get out and about in order to facilitate cases further.

In other words, 59% is a big drop on previous ‘normal’ quarters, but no one could suggest that Q2 2020 was anything like a ‘normal’ quarter. The forthcoming three-monthly periods are also unlikely to resemble what happened, for example, last year.

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What we can perhaps hang our hat on, however, is the speed of response in the housing market when lockdown was eased, the pent-up demand that was undoubtedly unleashed postlockdown, the greater levels of activity we have seen as a result, and the government initiatives which should hopefully keep those levels growing in the months to come.

What we cannot be so certain about is whether we will get similar levels of completion to match those previous quarter’s figures, especially given the level of disruption that has been inflicted on large numbers of businesses as a result of COVID-19.

Ideally, that activity would translate into offers which would seamlessly flow to completions, and I know that advisers, distributors, lenders and conveyancers are doing their utmost to make this happen.

OPERATIONAL IMPACT

But let’s not kid ourselves that operational capacity across these players has not been impacted greatly, and will not continue to suffer.

It won’t need me to tell you the situation with certain lenders at the moment in terms of servicing business – or that, for example, many conveyancing firms do not have offices open and large numbers of staff are still working remotely.

Everyone is no doubt doing their best, but there are few who might suggest they are working at something like a normal capacity.

But there is a large degree of positive momentum which, if can be sustained, should result in a considerable upturn.

From the perspective of our own business, we’ve seen record days, weeks and months of activity since lockdown was eased, and advisers themselves – when asked – have revealed they are much more confident about the future.

MORTGAGE INTRODUCER SEPTEMBER 2020

Back in Q1 this year, 85% of advisers said they were either ‘fairly’ or ‘very’ confident in the outlook for the sector; that had risen to 88% in the second quarter, and I suspect it will rise again, especially given the increased demand for advice that many firms are currently experiencing.

Importantly, that translates into 93% being positive about the outlook for their own business.

So, while Q2 this year will have a significant impact on the situation that advisers find themselves in, the future appears much brighter.

As all parts of the process become increasingly comfortable with the situation, and perhaps as more employees return to offices, we’ll see those completion numbers jump – aided by a motivated consumer base who want to be active in the property market, not least because of what they experienced during lockdown.

Advisers are in demand and must make the most of this.

Tales of potential clients being turned away need to be kept to the absolute minimum, especially when the forces of competition – particularly from direct channels – are only like to grow stronger.

Servicing clients in all manner of products will also aid the postlockdown fightback, and should ensure that advisers can remain increasingly positive about the future for a long time to come. M I

Advisers are in demand

www.mortgageintroducer.com

REVIEW

EDUCATION

Thinking long-term Michael Nicholls relationship manager, LIBF

I

t has been great to see support for the mortgage market coming from the government over the last couple of months.

Measures like the stamp duty break – which runs until 31 March 2021 and applies to all buyers purchasing properties of a value up to £500,000 – are much needed in the short term.

These moves, coupled with a surge in pent-up demand from buyers who were unable to complete or set house-buying plans in motion during the lockdown, have provided a sudden but very welcome rise in activity.

The lockdown was nail-biting for anyone involved with the property market, but now estate agents, lenders and mortgage advisers are working harder than perhaps ever before.

HOUSING BUBBLE?

Some estate agents are so rushed off their feet they’re not even booking appointments with anyone who doesn’t have a letter in principle from a lender.

However, as we all know, the mortgage market is not predictable.

Yes, there’s a high number of mortgage applications at the moment, but could it be a bubble? And what will it take to sustain the mortgage market over the long term?

We need the Help to Buy scheme (currently also extended to the end of March 2021) as well as other government support measures to help keep it going.

But there’s a twist, because the lockdown has changed priorities for many people. Outdoor space, for example, has become more important and with the rise in homeworking, properties in areas with good broadband are in greater demand.

With homeworking now widely mooted as becoming part of the new www.mortgageintroducer.com

normal, there’s really no need to be living close to work, or even near the station or bus stop. Consumers are reconsidering whether they really want to stay in major conurbations or move somewhere quieter, with a garden and more space for a home office.

Younger people who’ve been itching to get onto the property ladder are looking outside the main areas and seeing that dream within their grasp.

“Urban properties are becoming less desirable and more remote properties – especially in areas with good internet connectivity – looking a lot more attractive” That’s going to hit the buy-to-let (BTL) market, which has already been dealt a heavy blow since students went back to stay with their parents when university campuses closed.

Many students, particularly those from abroad, aren’t going back to campus in the autumn, so in some areas there’s a glut of rental properties available. That impacts rental income and makes keeping properties less attractive for landlords.

This is having a massive impact on house prices, with urban properties becoming less desirable and more remote properties – especially in areas with good internet connectivity – looking a lot more attractive.

RURAL IDYLL

Property prices in the countryside are creeping up just as urban property prices fall.

That’s before you’ve even looked at the impact of empty office buildings and retail spaces in city centres, some of which may be earmarked for repurposing as residential. If that does happen, demand in urban areas could fall even further.

What does all this mean for mortgage advisers? In short, the whole business

of being a mortgage broker has become a lot more complex.

It’s getting increasingly difficult to keep up with the changes in lenders’ criteria, which can change daily, or even hourly.

There are some useful tools online that can help keep you up to date but, even so, it’s taking a lot longer to source the right mortgage.

Mortgage advisers also need to be more analytical when assessing a client’s suitability for a lender.

Many borrowers have taken payment holidays and, according to the rules, should not be penalised for doing so.

But, while the payment holiday scheme has been extended, the Financial Conduct Authority (FCA) has warned that borrowers who ask for a second payment holiday will find it shows up on their credit file.

Conversations with clients have changed too. Where we used to focus on affordability, now we may be talking about the lifestyle needs of an individual. If someone’s looking for a home office, for example, they may need to budget for an extension.

REGULATION MATTERS

All of this means you need to update your fact-finding techniques and develop your research skills.

It’s not just about regulation and affordability any more. For our part, the LIBF Level 4 CeMAP Diploma will help improve these skills and increase your understanding of regulation.

Most importantly, we have a duty of care to our clients.

The CeMAP Diploma can help here too, because it will teach you more about consumer-orientated advice.

Right now, we need to get clients to think longer term.

After all, living in the country or by the sea may be heaven in lockdown.

But when life gets back to normal, will your client miss urban life? The pubs and clubs? Will they regret moving so far from a corner shop when they’ve run out of milk on a rainy night in mid-February? M I

SEPTEMBER 2020 MORTGAGE INTRODUCER

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PRECISE MORTGAGES, PART OF ONESAVINGS BANK

How Help to Buy could boost firsttime buyers’ home ownership dreams Adrian Moloney group sales director, OneSavings Bank

I

magine you’re a first-time buyer trying to get a foot on the housing ladder in the autumn of 2020.

Things are slowly getting back to some semblance of normality following an unprecedented global pandemic during which the housing market ground to a near standstill as the country went into lockdown.

To stimulate the market, Chancellor of the Exchequer Rishi Sunak announces a raft of initiatives to get things moving again. As a result, the average price of a house rises to a record high of £224,123.

On top of that, high street lenders start pulling up the drawbridge on deals for those with smaller deposits, meaning you’ve now got to save even more to secure the mortgage you need.

Perhaps it’s no surprise that aspiring homeowners are having to wait longer to buy their first property.

According to the government’s most recent English Housing Survey, conducted in 2017/2018, the average first-time buyer is 33 years old, with just 38% of those aged betweern 25 and 34 owning their own house, down from 55% a decade ago.

Despite all of this, research by Legal & General Mortgage Club found that 93% of first-time buyers are still considering purchasing a property in 2020, with the majority saying they definitely intend to buy this year.

Interestingly, this research also found that 13% of first-time buyers who had no plans to use the government’s Help to Buy scheme before COVID-19 impacted our lives say they now will.

So why are more first-time buyers considering purchasing a property

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MORTGAGE INTRODUCER

through Help to Buy? Could it be that restricted access to suitable mortgage products means that more people are exploring alternative ways to buy their first home?

Or could it be that that the stamp duty holiday announced in July means they won’t have to pay tax on the first £500,000 of property purchases?

Whatever the reason behind more people considering using Help to Buy, Precise Mortgages could be ideally placed to help them realise their homeowning ambitions.

As one of the first specialist lenders to enter the Help to Buy market, we understand just how important the scheme has been in helping buyers take their first step onto the property ladder.

And it’s good to know that our dedicated new build team will be supporting the recent changes made to the Help to Buy scheme, whilst still ensuring we meet the deadlines in place from the current form of the scheme.

Our simple, transparent Help to Buy criteria is designed to help customers purchase a property with just a 5% deposit, even if they’ve been declined by a high street lender.

We accept applications on the Help to Buy England, Help to Buy Wales, Help to Buy Scotland and Help to Buy London Shared Equity schemes, and we’ll consider customers with less than

SEPTEMBER 2020

perfect credit profiles. We also accept non-repayable family gifted deposits and self-employed workers with one year’s tax calculation and HMRC tax year overview or accounts.

In addition, to give prospective buyers even more of a helping hand, Precise Mortgages calculates our Help to Buy Equity Loan affordability based on 1.75%. We’ll also consider applications through the Forces Help to Buy scheme, even when combined with a traditional Help to Buy loan.

Mortgage offers for new build properties are valid for six months from the date of valuation and can be reviewed and even extended for up to an extra three months if the completion date slips due to unforeseen circumstances. We also offer homeowners the option to remortgage and capital raise to repay off their original equity loan.

If you have a customer who is looking to purchase a property through the Help to Buy scheme, our new build underwriting team is here to help.

The team is dedicated to assessing cases within 48 hours and making offers within 21 days, as well as providing support and regular progress updates.

To find out more, call the New Build team on 0330 159 6001 or visit www. precisemortgages.co.uk/Residential/ NewBuild. 

www.mortgageintroducer.com

FO

Celebrating 10 years of specialist lending solutions

Helping first time buyers get on to the property ladder Being a specialist lender means we’re well placed to support new build customers, even if they’ve been turned down by a high street lender. Our wide range of solutions are backed up by our dedicated priority processing team.

Available with refund of valuation fee (max £630) Only 5% deposit from customers including gifts from aunts and uncles Available for employed and self-employed Proof of address not required where we can verify electronically We’re committed to assessing New Build cases within 48 hours and providing offers within 21 days

Supported Help to Buy Schemes Help to Buy (England)

Help to Buy Scotland

Help to Buy Wales

Help to Buy London

FOR INTERMEDIARY USE ONLY.

Contact your local BDM 0330 159 6001 precisemortgages.co.uk

Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549).

Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

01966 (1)

Get in touch

Find out what’s next for New Build: precisemortgages.co.uk/residential/WhatsNextForNewBuild

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INTERBAY COMMERCIAL, PART OF ONESAVINGS BANK

InterBay Commercial: The story so far…

Roger Morris group director of distribution, OneSavings Bank

I

n my humble opinion, the success of InterBay Commercial boils down to two things: its history and its talented pool of exceptional people who are committed to achieving our customers’ goals.

At InterBay, our team has the expertise and knowledge to adapt to the ever-changing marketplace. It’s this experience that will guide InterBay through the next few months – and years – in unprecedented and uncertain economic times.

With the Bank of England warning that Britain is facing a record economic slump, brokers and landlords will be more reliant than ever before on specialist lenders with experience that can adapt to the needs of the market.

For landlords, the impact of the pandemic is thought to be less severe than originally anticipated; some seven in 10 expect their lettings business to be negatively impacted by the pandemic, down from eight in 10 in Q1.

Landlord profitability remains strong, with 87% generating a profit.

Looking back to the launch of InterBay in May 2006 at a Manchester Expo, the firm was brought to the UK market from Miami to focus on commercial real estate.

In 2012, InterBay was acquired by OneSavings Bank, becoming the group’s commercial lending arm.

Since then, InterBay has experienced some major challenges. To name just a few, the 2008 financial crash, Brexit and COVID-19 have all been significant periods for us.

In the last five years alone there has been a rise in specialist lenders playing in this market, especially cases where

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MORTGAGE INTRODUCER

the assets don’t fit the criteria, length of loan term and ability to use interestonly processes.

However, for customers it’s important to be able to speak to someone who properly understands the market and can help shape a deal using their commercial expertise.

Our BDMs are known within the industry for having the technical skills and knowledge to find bespoke solutions where other lenders have failed. This is what sets InterBay apart from its competitors.

No one can deny that it’s a challenging time for everyone at the moment, but every single team at InterBay has worked tirelessly throughout lockdown and has been contactable throughout, ensuring that our broker partners have had continued support when they’ve needed it most. Our BDMs have moved online, doing deals via WebEx, and I’ve hosted a record number of Zoom presentations to our broker partners to keep up momentum and add value wherever possible.

Our teams have worked collectively to continue to get deals over the line.

We give our brokers direct access to our underwriters because we know how valuable it is to be able to speak to someone who can work in partnership with you to find a solution.

As well as our underwriters, who are experts in their field, our BDMs also have commercial brokerage experience.

We encourage a 360 holistic approach to work and encourage staff to

SEPTEMBER 2020

support one another. Our latest recruit previously worked in our underwriting department and will be bringing those additional skills and expertise to his broker partners.

Despite this, it’s impossible to ignore the current economic situation. To adapt we have revised the commercial loans we offer to consolidate focus on our most popular products and ensure that all of our staff are able to support clients both now and for the future.

We’ve made improvements to our buy-to-let offering, with a focus on large houses of multiple occupancy (HMOs) and big portfolios. As our semicommercial offering is centred on the residential element, we can then base our loan offerings around that.

We’ll also continue to look outside of lending policy to help meet deadlines and overcome complexities.

I would always encourage our broker partners to pick up the phone if they’re working on a case or just want to sound something out – nothing replaces the value of a human conversation.

If you have landlord clients who are considering their next move, visit the InterBay website and get in touch with your local BDM. They’re always on hand to answer your queries or explain more about how our bespoke products could offer you a solution. We’re the experts when it comes to unravelling complex cases, so let us know what you need and we’ll make sure to go the extra mile to help you get your case over the line. 

www.mortgageintroducer.com

For your HMO or MUFB cases: • 1-6 bedrooms/units up to 75% LTV • 7-20 bedrooms/units up to 70% LTV • Unique ownership structures • No maximum loan size

InterBay it.

This is just one example of the many challenging cases we're able to support.

We use our experience and determination to shape bespoke solutions for our brokers and their clients. So let us go the extra mile and InterBay it.

Visit interbay.co.uk for more information.

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KENT RELIANCE FOR INTERMEDIARIES, PART OF ONESAVINGS BANK

In conversation with Dawn Mirfin, group underwriting director How would you describe your career path to date and would you recommend it to others?

I hadn’t planned a career in lending, originally having wanted to be a nurse, so my career path hasn’t been as linear as some.

I started at an estate agency after leaving college, before moving to London to do a stint as a PA to the MD of a recruitment consultancy.

After getting married and having my son, I was offered a part-time job at Chelsea Building Society. A few months into the job, they opened a mortgage sales centre, and that’s where my career in lending really began.

I later joined OneSavings Bank through the Kent Reliance brand and have been with it as it has grown, from the acquisition of InterBay Commercial to – more recently – the merger with Charter Court Financial Services.

I consider myself to be very lucky as I’ve found a career that I love. It’s rewarding to know that what I do helps people to achieve their dream home in a responsible way, while also supporting the growth of the business.

What makes a good underwriter?

There are good underwriters that come from all walks of life, but I’ve found that life experience can really help with this career. Managing a budget, having an eye for detail and most importantly being able to make a decision are vital qualities for anyone in underwriting.

What challenges did you face with regards to COVID-19 and were you able to overcome them – how?

Personally, I was met with the same challenges that everyone else had in the shift to home working, and it was important to make sure that my team had all the tools they needed to work

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efficiently from home. The lockdown had well-publicised implications on home-buying and so we all spent a lot of time working through our pipelines to assist our customers who were trying to continue with their home financing as well as supporting our colleagues in other areas with incoming payment holiday requests.

We also had a number of policy changes to implement quickly, and additional checks and balances introduced to protect our applicants.

What key message do you want to send to brokers?

We want to be a true partner to brokers, working with them to make their clients property ambitions come true. We are used to dealing with specialist and complex cases, and our bespoke lending approach means we can assess each case on its individual merits.

We have a dedicated sales support team who can offer guidance and support through our ‘live chat’. In addition, we operate a buddy system with our senior business development managers and the underwriting and completions teams to work on cases together. We approach each case with a ‘look to lend’ attitude, and work hard with intermediary partners to achieve the best outcomes for the customer.

lend to all cases, however we work closely with our sales team to try and find solutions for complex deals.

For brokers with specialist cases, I’d always advise you to speak with your local BDM to discuss the case to see if we can help.

And finally, what have you been most proud of and what would you still like to achieve?

Winning Credit Person of the Year at the British Mortgage Awards in 2016 was definitely a career highlight for me.

My aim for the next few years is to build on the great work we have been doing at OneSavings Bank since the merger last year, and to see all our brands – Precise Mortgages, Kent Reliance for Intermediaries and InterBay Commercial – work closely together to support brokers across all types of lending.

By working collaboratively, we aim to be the ‘go-to lender’ for brokers.

On a more personal note, 36 years of marriage and a successful and happy son sums up achievement to me! 

Can you highlight some common application areas that brokers find challenging and suggest a solution?

As a specialist lender, we have the ability to consider applications that other lenders may not be able to. This is because we look at each loan application individually and make a judgement based on the case’s own merits.

This can make it difficult for brokers to understand what we can or cannot do. Like all lenders we do have restrictions in place that mean we can’t

MORTGAGE INTRODUCER SEPTEMBER 2020

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THE OUTLAW

THE MONTH THAT WAS

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

THE THE

AND THE

O

nce again, this month there is simply far more to cover than these pages allow. So, I’ll keep it snappy.

Kicking off in earnest, it’s the footie season again and following his seventh consecutive ECL failure, Man City manager Pep Guardiola is chasing the game’s ‘GOAT’ (Greatest of All Time - for all you soccer luddites).

It astounds me as to why observers are still shocked when Oilchester City mess things up. The manager’s negligence in rarely signing a legitimate defender is shocking, and let’s consider this; last season every other “Big Six” club beat them… and Wolves actually did it twice.

Despite having spent billions, they still finished a mile behind the crowing scousers who in my estimation will irritatingly beat them again this year, Lionel Messi arriving or otherwise.

Talking of ‘GOATS’, there was a time when Lloyds

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MORTGAGE INTRODUCER

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Gavin Williamson: Corporal Pike

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Bank, and ergo, Halifax were the broker community’s number one.

Alas, no longer. Amid a renewed opening of the PPI can of worms, a truly corroded share price and the continued demise of branch banking and the high street at large, one City tycoon (Jeremy Hosking) has even gone so far as to suggest that Lloyds is now facing an “existential threat “, suggesting that the bank is little more than a public utility company these days especially given that the chairman there seemed to make little apology for the 95% fall in Q1 profits.

Lloyds has also just been censured for its appalling treatment of CBILS and Bounce Back loan applicants.

Sources tell me that the actual mortgage proposition there has held up well through COVID. But others tell me that the leadership group across the bank have become ever more risk-averse and reasons are found for not doing something, instead of for doing them. Smells like Horlicks and slippers and folk just marking time. We’ll see.

Staying with the banks, I was surprised to read that despite COVID etc, JP Morgan are pressing on with plans to launch a new digital challenger bank in spring.

Incredible news really given that A) Monzo recently revealed that losses last year had doubled to a whopping £114m, B) Starling still hasn’t made a monthly profit, and C) Revolut saw operating losses triple to £107m last year.

It seems also that the digital-crazy keyboard warriors at each of Trussle and Habito have also gone into long overdue hibernation. No more irritating

Maureen Lipman: Still going strong

Louisa Sedgwick: Vida is back in the market

“let’s -state-the-bleedin’ obvious” consumer surveys for us to be patronised by!

A final note on the banks. Did you know that they are presently THREE times as strong as they were back in 2008?

They now have huge capital buffers to absorb shocks. Alas, some are still looking to eek out a tidy profit from sticking up their rates on Product Transfer (PT) business (no doubt secure in the knowledge that brokers are finding remortgage processes a soporific nightmare to engage with, and resultingly some are taking the path of least resistance with a PT albeit at half the procuration reward? One hopes that the FCA is watching, on both counts.

Talking of counts (well, almost!), this month’s C U Next Tuesday Club consists of; The ever-sulking Lewis Hamilton (yet again!), the deluded middle class offspring and rabble that calls itself Extinction Rebellion, Ing-er-lun’s various COVID-breaking footballers, and Barack Obama.

The ex-President was recently nominated for the Nobel peace prize. What a croc! This is the bloke who exacerbated the war in Afghanistan, misread the Arab Spring, and embarked on a disastrous noexit strategy in Libya.

Maybe the award was part of the now endless and universal trend towards diversity recognitions and admonishments. (But more on that shortly!)

Turning back to the lenders, Nationwide disappointed brokers with its haircut on parental deposits and I’m not sure that many brokers follow the logic of that step.

One thing’s for sure. Lenders have never been more under the cosh in terms of capacity issues, nor surveyors. → SEPTEMBER 2020

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THE OUTLAW

THE MONTH THAT WAS So, amid the maelstrom it’s good to see the likes of Santander and Coventry still leading the way.

The Outlaw shall reserve judgment on Barclays until next month, as they appear to be playing kisschase with brokers’ emotions right now.

We are also seeing several lenders now re-emerging in the market after taking an enforced breather and foremost amongst these is Louisa Sedgwick’s Vida.

If you haven’t used this lender then do give them a try as amongst their highlights, they lend up to 85% LTV, they have a re-designed and very brokerfunctional website, and a new chatbot (called MILO!).

Definitely a lender looking to change mortgages for good.

There was also some good news at Sky Sports.

[The Outlaw feels that amid the virtue-signaling and ridiculous tokenism which now characterises panel appointments in sports on TV, the male, pale and stale brigade have been short-shrifted.

There’ve been far too many tokenist appointments, as evidenced on the BBC’s recent coverage of the Arsenal v Liverpool match where not a single white male featured!

However, the departures of Messrs. Le Tissier, Nicholas and Thompson are long overdue.

Le Tissier rarely answered a direct question, Nicholas (and his 1984 diamond earing!) are caught in a late mid-life crisis, and Thompson can’t even string a sentence together that is either grammatically correct by primary school standards, or doesn’t feature the words “Livpull Futball Cluuub (where seemingly it still means more!).

The frustrating consequence of this is that the incisively comedic Paul Merson and the indomitably brilliant Jeff Stelling will now likely be joined by a selection of ex-professional females and underqualified pundits drawn from minority groups.

I stand in the face of any charges of alpha male chauvinism here… WHY CAN’T TV PRODUCERS JUST GIVE THE JOBS TO THE BLOODY BEST PUNDITS, AND NOT THOSE ARRIVED AT VIA A GENDER OR RACE SCORECARD???

On which subject I fully expect to see Rio “I’ll state the bleedin’ obvious again” Ferdinand keep his job despite his SIXTH driving offence.

Right time, right place if there ever was a case of it. And another one who clearly didn’t sit an English O level.

Back to our world and the market itself. Incredibly there were over 100,000 transactions in July and nigh on £37bn worth of deals agreed.

Those are pre-COVID numbers, plus some.

Adrenalines by the SDLT holiday, it’s going to be a crazy 12-month white knuckle ride now until Q3 of next year when all manner of questions will need answering around the recovery’s sustainability.

But what’s still frustrating is that too few lenders are “inviting “their processing teams physically back

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Phil Thompson: linguistically challenged

to work, and in doing so the service at these levels is slowly diminishing.

For which I blame Boris the Buffoon, who amid the worst of the spring’s scare-mongering frightened 70% of white-collar UK in to staying at home.

His whole stewardship (with now no less than a dozen U turns!) amid the pandemic has been the equivalent of Captain Mainwaring leading Dad’s Army in to battle...

Starring Gavin Williamson as Corporal Pike, and Matt Hancock-up as Corporal Don’t Panic Jones.

The present Cabinet team is the most inept and gutless in modern political history. Apart from Brexit(!!) just WHAT are they getting right at the moment?

To finish with, a final rant about how this great country is losing its national identity amid a torrent of misinformed and irreverent liberal propaganda.

I give you the anti-English mess over the Land of Hope and Glory and Rule Brittania anthems at the Proms (the latter of which was originally penned by a SCOTTISH playwright!!!).

Further, we have Nicola “Krankie” Sturgeon seeking to criminalise virtually anything which causes laughter or any kid of offence and who is still lecturing us on everything from schools to political etiquette - yet in a recent independent survey of bullying in Parliament it was found that the No 1 proponents of bullying were... you guessed it... the SNP! Identity politics and protest movements are tearing this planet apart. As ever, humour can cut through all the sh*te and on this occasion I take solace from the inimitable Maureen Lipman’s remarks when dressing down that noisy and condescending actress, Miriam Margoyles, who in Maureen’s estimation “is a successful left-wing socialist with several houses!!” … Pure Gold, Maureen! Thank You! Hang in there… it will pass. I’ll be seeing you. M I

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ADAPTING TO CHANGE Jessica Nangle covers the key points raised at Mortgage Introducer’s recent round table, sponsored by Barclays, which looked at how the mortgage market will adapt to the new normal and what to expect in the coming months

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his year has challenged the mortgage market in ways never experienced before. Whether it be maintaining good service levels at a time when a lot of businesses are furloughing or maintaining a work from home programme for their staff, or withdrawing products from the marketplace to allow time to catch up with pent up demand following a market standstill in March. This has been a time when the mortgage industry has had to adapt to a new normal.

This crisis has impacted all parts of the mortgage process, leading to slower underwriting times, product availability and pricing, however it has also shown lenders and brokers alike new ways of helping borrowers through challenging times.

Through online webinars, to using new technology whilst working remotely, this crisis has forced the industry into a new and unfamiliar way of working, which some say has changed the market for the foreseeable future. But will this be sustainable, or will the need for face-to-face contact and traditional ways of working become paramount once again?

How the market will fare over the coming months was discussed at our latest round table, with Mortgage Introducer’s Ryan Fowler chatting to Connect

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MARKET Mortgages, John Charcol, Barclays, the Association of Mortgage Intermediaries (AMI), MCI Mortgage Club and Alexander Hall to find out more.

WHAT TO EXPECT Looking at the recent house price data from Halifax and Nationwide, it shows remarkable August increases, with average UK house prices reaching record highs. It has come as a surprise to many, with industry experts such as Ray Boulger, senior technical mortgage adviser at John Charcol, formerly expecting large declines in the latter quarter of 2020. “I see a continuation of the current trend through to the rest of the year,” Boulger claims. “I expect house prices to rise by 8% following the pandemic; initially I believed we would see a fall of 10-12% so the market is stronger than expected.”

The reasons for the increasing prices vary according to the industry. Pent up demand and the stamp duty exemption set out by Chancellor Rishi Sunak in July both played their part, and most agree that an extension to the exemption, which currently ends in March 2021, would alleviate the pressure on pricing and in turn allow the industry to adapt faster.

Liz Syms, chief executive at Connect Mortgages and Connect for Intermediaries, is one such expert.

“August was not just the post-lockdown rush,” she says.

“Let’s hope the government take some time to think about how they can sustain that market, particularly continuing with the stamp duty concession for longer.

Otherwise we might find ourselves in a position where in early 2021 we have another big rush and everyone is struggling – in terms of service standards and time frames – and then a big dip afterwards. It would be good if we could avoid that if at all possible.”

The recent rush in business is one that many are grateful for, but from a lender perspective, it was a challenge. “From a lender perspective it was really

“The stamp duty exemption has driven demand on top of pent up demand, but lenders are getting better at controlling their volumes and improving their service” CRAIG CALDER

“This is a frustrating time for everyone. Brokers need to manage client expectations in the current market” LIZ SYMS

difficult to cope with,” says Craig Calder, head of channel development at Barclays. Service issues have recently been in the spotlight as many lenders struggle to keep up to their usual turnaround times, leading to delays and fractions within the process. “There were a lot of factors that contributed to service issues at the start,” Calder claims. “We had two sites in India that closed within two hours notice, colleagues who were impacted

by COVID-19 and a lull when lockdown initially began.

The stamp duty exemption has driven demand on top of pent up demand, but lenders are getting better at controlling their volumes and improving their service.”

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, is pleased to see the market doing well, but with the optimism comes increased caution. “We are very busy, but pent up demand is a part of that,” he says. “Lenders changed their furlough criteria in August as the scheme ends which I believe will create some negative economic data.”

Home movers are experiencing some of the most ideal mortgage market conditions ever seen, with Help to Buy proving to be a success amongst this type of borrower. Cunnington even claims that Alexander Hall saw their best Help to Buy month ever in August, however there is a downside. “So many clients are waiting for their options to come back on the table,” he says. “I fear this may not happen until next year.”

FRUSTRATING TIMES The increased delays in some parts of the mortgage process have proved challenging for all, with the crisis’ impact on service causing some unwanted attention.

“Valuers have had a massive backlog,” Craig Calder says.

“I ask brokers for patience. Unfortunately we have seen some ‘not nice’ behaviour from some members of the broker community which we have no tolerance for.” →

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“So many clients are waiting for their options to come back on the table. I fear this may not happen until next year.”

GREG CUNNINGTON

This unwanted behaviour could be down to several factors, however Mel Spencer, head of MCI Mortgage Club, claims that there are definite culprits. “This comes down to estate agencies and new build providers who are putting pressure on brokers – particularly when it wants to use an attached broker.” Managing expectations is key, as outlined by Syms. “This is a frustrating time for everyone,” she says. “Brokers need to manage client expectations in the current market.”

Some lenders are also prioritising profit over service however, according to Calder, which is also causing problems. “It is inevitable that it will take longer in some cases,” he says. “When we reached seven working days, we took that deliberate step to control our volumes and get back on track.”

The way forward is collaboration, Cunnington says, and believes that it is the way to help navigate through uncertain times. “Lenders did a fantastic job during lockdown to stay operationally active,” he says. “We are moving into a new phase now, which I hope will encourage lenders quoting 10-15 working days to look at their operation and review it. I believe most of the lender community will come back in line now, but it is the responsibility of the broker community to collaboratively work with lenders.”

To forward this idea of collaboration, Barclays recently did an online session in collaboration with a large, unnamed firm which involved online face-to-face interactions with underwriters; allowing key questions to be asked such as what the ideal packaged case looks like and for underwriters to explain the pitfalls to avoid. According to Calder, this went down well and Barclays are looking to get these sessions across to the bigger brokers initially but with the intention to eventually record online sessions for others to help as many as possible.

“It is about that transparency and guidance,”

Cunnington says. “One of the issues we have all had has been manual assessment of a self-employed case.

We had no guidance, at first, about what that meant. I think we are now getting there, which is great, but the more the broker can know – regarding lender choice and knowing whether the outcome will be okay which is where we were pre-lockdown – the slicker that will make everything for everyone.”

PREPARING FOR THE POSSIBLE Despite the UK-wide lockdown beginning to ease, certain areas such as Leicester and Oldham are facing local lockdowns due to a rise in COVID-19 cases. With an increasing number of areas being faced with the possibility of heightened restrictions, it continues to affect the marketplace, however Boulger believes the overall impact would be minimal.

“If the government were to impose a regional lockdown in London that could impact the wider marketplace,” he says. “However generally, I think the impact would be minimal. The part of the market which would see the largest disruption would be completions, as no-one would be able to move into their new property.”

The government guidance enforced at the time regional lockdowns were enforced allows house moves to take place, albeit with heightened restrictions.

Beth Rudolf, director of delivery at the Conveyancing Association, spoke back in July about how the industry believes it is possible to proceed with housing transactions and moves in the affected areas, as long as guidelines are adhered to.

Beth Rudolf however did state the stark reality of the situation when Leicester was placed into lockdown.

“Unfortunately, we anticipate that Leicester is unlikely to be the only area impacted in the future,” she said.

“But it does mean that, should other local lockdowns be

“According to our latest research, 74% of our brokers predicted an increase in the remortgage business. This is quite a high proportion” MEL SPENCER

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COVER

MARKET introduced, the property industry is in a place to keep chains moving and to ensure our clients can go ahead with their moves as safely as possible and do all they can to avoid spreading the virus.”

It remains to be seen how many more, if any, regions will be placed into a regional lockdown but as with how the crisis has carried itself so far, there are many unknowns that the mortgage industry will need to prepare for.

STAYING STRONG The remortgage market also struggled with slow processing times and a struggle to keep up with demand, following a rush of homeowners keen to remortgage before the crisis took hold back in March.

As the market slowly recovers, many are expecting this part of the market to remain unchanged for the rest of the year. Mel Spencer highlights data from MCI Mortgage Club’s latest research, which gives a broker perspective. “According to our latest research, 74% of our brokers predicted an increase in the remortgage business. This is quite a high proportion, and this was just feedback coming from the brokers,” she says.

Despite the figures reported in MCI’s research, Cunnington provides a warning for brokers. “I see no reason as to why it shouldn’t be [increasing], however we need to ensure, as brokers, that we are being proactive with it,” he says.

As brokers are now faced with a busy purchase market, Cunnington believes that remortgage business should not be forgotten as it is the “backbone” of ones business as an intermediary. “Just because you may have a few very busy purchase applications in your diary, don’t let that [remortgage] client bank slip. It is about being careful and defending the position – we need to treat remortgage business as importantly as we did in lockdown when it was all we had.”

THE NEW NORM Through these times of crisis, we have all had to learn to adapt. Where once meetings, events and exhibitions were the usual, none of that has been possible and has been replaced with Zoom calls and remote working.

The effectiveness of remote working and online interaction has been a contentious subject, with some believing it has benefitted their business and has potentially removed the need for office working whilst others believe it has been problematic, with these businesses already looking for precautions to allow staff

back into their offices. But, the mortgage market – a “relationship industry” according to Robert Sinclair, chief executive at the AMI – has seen a mixture of the two.

“We are facing the new normal,” says Liz Syms.

“You cannot beat face-to-face contact, but it has its challenges. Remoteness of doing online sessions means lenders can reach more people in wider areas, but I am keen to see a balance of the two moving forward where we embrace the best of both.”

“There needs to be an increase of higher LTV mortgages,” says Ray Boulger. “It is unacceptable that so many first-time buyers are locked out of the market” RAY BOULGER

Business development managers (BDMs) are used to interacting with brokers by meeting face-to-face and catching up on the latest products. However this has not been possible, and Calder says this crisis has brought questions to the forefront about how their role may change moving forward. “We need to look at how the usual interactions between BDMs and brokers has been; it needs to change,” he says. “We are starting to ask whether brokers will still want face-to-face contact, and if they do what support model we would need to put in place.”

Sinclair believes that this online way of working is limited in capability and is calling for change.

“Communicating through online mechanisms doesn’t work as well,” he argues. “Firms also have to build culture and understand culture, and I’m not sure you can do cultural work in this environment. I think going back to some elements of face-to-face is going to be critical for firms. The challenge for management and people in this industry will be getting the new normal to work in a better way for everybody.”

RESTORE AND RECOVER As observed from the experts, the market is surprisingly stable however there are concerns moving forward about how unavailable the market will be for a certain group of borrowers. “There needs to be an increase →

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“Communicating through online mechanisms doesn’t work as well. Firms also have to build culture and understand culture” ROBERT SINCLAIR

of higher LTV mortgages,” says Ray Boulger. “It is unacceptable that so many first-time buyers are locked out of the market.” Boulger recommends a ‘pop-up’ scheme that replaces Help to Buy or have it added to.

Otherwise, he argues, first-time buyers or those with a 5% deposit will increasingly turn to Help to Buy, causing a disproportionate rise in the price of new builds. The future will be about restoring and recovering the market, with the final quarter of this year and 2021 set to be an interesting time. As the furlough scheme comes to an end, there are many questions as to how borrowers’ needs will catered for in the marketplace.

This could include criterion being altered and more specialist products becoming available to cater for those with adverse credit following the crisis. “Credit problems may be problematic,” says Liz Syms. “Some flexibility from lenders would be good for those who have had financial challenges throughout this time.”

Robert Sinclair at AMI predicts that house prices will rise by between five and 10% from the start of crisis to March 2021, and many are hoping for an extension of the stamp duty holiday to be announced in the Chancellor’s Autumn Statement. However, Ray Boulger believes that affordability will remain good thanks to lower interest rates for longer and this, he claims, will “hold up” the market.

the market adapts and reacts to these changing trends.

Many drew comparisons to the 2008 financial crisis as lockdown was imposed, and these parallels drew louder as it was announced that the UK was in recession back in August. However the mortgage market has seemingly showed resilience and has managed to survive and recover quicker than most where expecting.

The industry may look to the Autumn Statement with hopes that the current implementations regarding the stamp duty exemption will be extended to further help the market’s recovery, and will hope in time that an increased number of high LTV products will re-enter the marketplace to allow these prospective homeowners to once again fulfil their dreams of owning a property, however for the time being it remains to be seen how long it may be until this becomes a reality and whether the exemption will in fact be extended.

Speaking to the industry, it is clear that steps need to be taken in order to return the market back to how it was pre-COVID. Following turbulent times, it appears that many within the industry are focussing on getting back on their feet, catering to demand and adjusting their product ranges in order to get through the crisis as smoothly as possible.

The marketplace is showing signs of a hesitant recovery, however many of the scars from the crisis will take time to heal as the mortgage industry adapts to a new normal. M I

ADAPTING TO CHANGE As well as adapting the mortgage market to kickstart the post-COVID recovery, the industry will also have to adapt to a changed borrower and potentially a different picture as to where customer demand lies.

More demand for open spaces, de-urbanisation as an increasing amount of customers look to stray from busy city centres and less demand for communal housing are all potential trends that could be observed in the coming months, and it will be interesting to see how

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LOAN INTRODUCER

SPOTLIGHT

Changing face of buy-to-let Natalie Thomas catches up with Andrew Ferguson, managing director, West One Buy-to-Let to discuss the changes facing the market What type of buy-to-let demand are you experiencing?

Demand has definitely picked up in recent weeks. COVID-19 has probably increased the need for a more personalised underwriting approach where a more holistic view is required.

We are seeing a lot of unusual enquiries just now.

There’s a lot of interest in short-term and holiday lets as well as HMO type properties as landlords seek strong yields.

We are also seeing a noticeable increase in professional developers choosing to retain and let units in the current climate.

As a specialist lender, what are some of the challenges in the post-lockdown world?

Lenders will be assessing their own risk appetite on an ongoing basis, planning for various scenarios, positive and negative.

We are no different and are cautiously optimistic about buy-to-let and are comfortable to have relaunched most of our pre-COVID-19 lending criteria.

There has always been a need for skilled underwriting, but perhaps even more so now, which is a trait we believe is strong within our business, aided by our broad property market experience.

As a non-bank lender, this has supported us in developing strong funder relationships which are really important. Working closely and effectively with funding partners will be an important factor, particularly if we see a second lockdown.

Has it become harder to ascertain a client’s affordability?

It’s not so much that it has become harder, but COVID-19 has created a higher-risk environment, so we have certainly gone to greater lengths to ensure that our landlord clients have non-property related income or some background savings they can draw on if there are void periods.

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“The full impact of tax changes come into force this April. This could catch out some small-scale individual landlords” We don’t insist on a minimum income for buy-to-let, but it’s not in anyone’s interest for us to lend, placing landlords in difficulty, if they were to face periods without rental income without having any form of safety net in place.

What challenges do you think lie ahead for the buy-to-let market?

Underlying rental demand remains strong but there are some headwinds the market needs to contend with, even in the absence of COVID-19.

The full impact of tax changes come into force this April. This could catch out some small-scale individual landlords who will find that buy-to-let is far from a ‘licence to print money’. The changes have driven an increasing shift towards professional landlords and they are more likely to have planned effectively for this scenario.

A second wave of coronavirus, and a return to lockdown, would clearly be very bad news, in some ways worse than the first time in terms of the impact on confidence in the market and the economy.

The private rented sector is particularly exposed to a prolonged economic downturn.

One in five households rent privately. If unemployment rises sharply, there may be large numbers who cannot continue to afford their rent. This makes it all the more important that landlords have some builtin financial resilience to withstand potential voids. www.mortgageintroducer.com

Andrea Bocelli

Making it personal When you were young, what job did you aspire to as an adult?

I was very keen on sport, especially football and tennis, so it would have been great to be a professional sportsman – but sadly, not to be.

Is there something about yourself that people would be surprised to hear?

One of my bucket list items is to go and see the opera singer Andrea Bocelli perform in Tuscany.

What is the best bit of advice you have ever been given?

Don’t dabble in lots of different things: find something you really enjoy and are good at, focus on it, give it your full attention, and don’t be drawn off course. It’s better to be really good at two or three things, than to be average at lots.

What is your most prized possession (aside from family)?

I like to relax with a nice glass of wine and a good book, so I’d probably have to say my Kindle.

MI

www.mortgageintroducer.com

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SECOND OPINION

Knock on effect Natalie Thomas asks how changes in the first charge market are affecting the second charge market

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ew business volumes in the second charge mortgage market were down a staggering 71% in June, compared to the previous year.

COVID-19 and pressures on the wider economy have been attributed to the fall but are there any other factors?

Events in the second-charge market can often be a reflection of what is happening in the first-charge mortgage market.

Product withdrawals, rate increases and criteria rejigging have all featured heavily in the first-charge market over the last few months.

So, Loan Introducer asks: “How are events in the first-charge market impacting the seconds market at the moment?”

Jason Berry group sales director, Crystal Specialist Finance Whilst overall our application volumes moved to record levels in July 2020, the actual percentage share of seconds cases has reduced by 66% from March 2020.

This downward trend occurred despite the affordability and high LTV restrictions we observed in the first-charge market...

At present we are simply seeing limited demand for second charges. Concessions on Stamp Duty and planning relaxation via the new permitted development rules will undoubtedly help increase overall property transaction volumes until March 2021 but although there are various home improvement grants available now from the government I see seconds volumes remaining flat. I would love to be proven wrong and it would be great if some LTV innovation could be created by the seconds lenders.

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Alistair Ewing

Matthew Arena

owner, The Lending Channel

managing director, Brilliant Solutions

As a broker we have a footprint in both the first and second charge market and historically this has been about an 80/20 split in favour of seconds. This split however has now completely turned around since lockdown started, to 90/10 with firsts now being our dominant Financial Conduct Authority regulated product.

The increased demand for mortgages has really only come about due to the inactivity during lockdown and I assume market demand will cool significantly over the coming months. With our business being predominantly broker introduced; I do think brokers might be struggling big time just now with a lack of capacity due to increased mortgage enquiries, in that they simply don’t have the time or inclination to look at nonmainstream opportunities – like seconds.

Mark Evans product director, Masthaven The second charge market was impacted more heavily in the initial stages due to a reasonably high proportion of providers not being retail-funded and therefore finding it difficult to fund their businesses, as wholesale funding dried up.

Supply has started to return and the market has seen a bounce-back in the last couple of months – this is mainly due to lenders increasing their confidence in criteria options in respect of LTV, income and flexibility as customers move out of being furloughed.

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The core benefits of secured loans have not changed but lender risk appetites have and that is affecting the seconds market, not the first charge market. High LTVs, affordability stretches and loans for any legal purpose are all still available but the market is well below its pre-COVID levels.

Secured loans typically involve additional borrowing which takes the form of two basic categories; aspirational borrowing or need based borrowing. Aspirational borrowing is very limited in this environment; borrower demand is down for the majority of people with so many being directly or indirectly affected by the crisis.

Needs based borrowing is still high but in these markets, lenders are less inclined to lend to those who need the money. After all, the outlook is so uncertain and the cases typically come with more risk.

As payment holiday headaches, property price risks and job uncertainty risks all abate, the market is returning and satisfying the needs based borrower.

The return of aspirational borrowing, when it comes, will hopefully see some pent up demand released and a stronger market.

Anna Bennett marketing director, Positive Lending Recently, we have seen some exciting product innovation in both the first and second charge markets. In the first charge world, Foundation and Pepper have launched some great buy to let ranges. www.mortgageintroducer.com

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SECOND OPINION

When it comes to second charges, UTB and Optimum are offering higher LTVs with good rates. Shawbrook are also offering some lower rates.

In terms of impacts, we’ve seen an uptick in first charge product transfers needing topups with second charges; although this does come with some financial risk to us if the broker or client is selecting a product with no early redemption charges, as it may in effect be used as a bridging loan when the typical remortgage doesn’t fit due to outstanding debts held by the client.

Steve Walker managing director, Promise Solutions Experiences will differ depending on who you talk to. Second charges are used exclusively www.mortgageintroducer.com

for capital raising so less people will be borrowing for aspirational purposes – they will be playing safe.

Less people will be borrowing for business purposes when they can take advantage of Coronavirus Business Interruption Loan Scheme and bounce back loans.

Those second charge firms which have a strong foot in the direct to consumer market, often from referral relationships with comparison sites, will probably say that demand for seconds remains fairly strong.

Those which rely on pay per click will also be able to generate reasonable enquiry flows but with conversion rates reduced there will be a question mark over their willingness to spend speculatively.

However, firms which are broker-fed are likely to feel a more significant reduction in volumes. I don’t think the changes in the first charge market have altered borrower’s demands for seconds.

“I don’t think the changes in the first charge market have altered borrower’s demands for seconds” Steve Walker It is other external factors causing this.

However where there is broker in the chain, we are finding they are busier than normal on core mortgage business and have less appetite to deal with second charge enquiries.

Unless a borrower has an urgent and important need for a second charge, who could blame a broker for suggesting they wait until the lenders criteria improves.

Thankfully we are seeing those improvements now so brokers should now start taking a closer look at second charges again. M I

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FIRST CHARGE LENDER CONSENT

Protecting the Natalie Thomas considers the implications of the FCA’s consultation on vulnerable clients for the second charge market

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elping vulnerable clients is part and parcel of being a financial adviser and this can be especially true for those working within the second charge mortgage market.

While second charges are increasingly becoming a more mainstream product, they are still a popular option for those who might be in a less than perfect financial situation.

In July this year, the Financial Conduct Authority released the second part of its consultation about helping vulnerable clients.

It has made it clear that it wants financial firms across the board to ensure the fair treatment of such borrowers is fully embedded into their business and has published some draft guidance to help firms achieve this.

It estimates that 24 million people in the UK display one or more potential characteristics of vulnerability – which include physical and mental health issues, recent life events such as bereavement, capability and financial resilience.

Such clients it says may be particularly susceptible to financial harm and wants to ensure their outcomes are the same as others.

While most firms would agree that they want to ensure the best outcome for vulnerable clients, in reality, this is no mean feat.

It’s a delicate issue and one that leaves little room for error for financial firms, especially in today’s claim culture.

So, what does the guidance mean for the second charge market?

SPOTTING A VULNERABLE CLIENT The definition of a ‘vulnerable’ client is vast. In its consultation, the FCA states: “A vulnerable customer is somebody who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.

There are many reasons a person may be vulnerable.

These may be related to health, capability, resilience, or the impact of a life event.”

It believes more borrowers have fallen into the

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vulnerable category since the onset of coronavirus and while many firms are getting it right, its findings show others are failing to ensure the fair treatment of such borrowers.

And with 23% of workers either furloughed, made redundant or having lost hours and pay during the pandemic, the issue is one which looks set to escalate.

“With a sixth of all UK mortgages on a payment holiday, we do see many customers looking to take a payment holiday due to the continued uncertainty the current pandemic is driving, says Mark Evans, product director at Masthaven.

“Given what is happening around us, many customers are quite rightly concerned about their future employment, their business performance and health. With this in mind, we do see much higher levels of enquiries from customers who are potentially more vulnerable at this time for whatever reason,” he adds.

While some vulnerabilities might be obvious, others are less so, which can sometimes make identifying a vulnerable client the first hurdle for firms.

The FCA guidance suggests that firms should set up their systems and processes in a way that will support and enable consumers to disclose their needs.

This however might be hard if clients are unwilling to disclose their particular vulnerability. The guidance also states that firms should help front line staff to understand how to actively listen out for information that could indicate vulnerability and, where relevant, seek information from customers displaying such characteristics.

“The challenge is two-fold – first is having the processes and controls to identify vulnerability and second is helping in the most appropriate way,” says Buster Tolfree, commercial director of mortgages at United Trust Bank.

“Vulnerability comes in many different forms; health, financial, mental and others. It’s about having appropriately trained staff and then the right escalation and support paths to accommodate them.

In some cases, proceeding with an application without additional elements such as independent legal advice or further information may not be in the customer’s www.mortgageintroducer.com

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FIRST CHARGE LENDER CONSENT

e vulnerable “Once a client has been identified as vulnerable, the adviser shares the case with the vulnerable client champion who reviews the enquiry and listens to all call recordings to fully acquaint themselves with the situation. They then support the client and our adviser through the application process to ensure the correct and best advice is provided to them.”

best interest. Sometimes not proceeding with the application is the best outcome, although they may not always see it that way.

“Identifying any potential vulnerability and ensuring positive outcomes have always been key considerations for us. We aren’t seeing a lot of enquiries from this type of borrower, but that said, we have various checks within both our underwriting and servicing processes to ensure that when a vulnerability flag is identified, we take that customer out of the standard process and handle things in a more specific and tailored way; reflective of whatever the potential vulnerability may be.”

Anna Bennett, marketing director at Positive Lending, reveals it has an appointed ‘vulnerable client champion’ - a member of its senior management team who oversees all cases for vulnerable clients.

“We have a clear process to follow,” she says. www.mortgageintroducer.com

CLARITY OF GUIDANCE Asking the right trigger questions and a close examination of the client’s finances should hopefully be the first step to spotting a vulnerable client.

The regulator however has purposely shunned a prescriptive approach in its guidance in order to avoid a tick-box approach and encourage firms to adopt a more rounded approach.

“Fair treatment of vulnerable consumers should be embedded as part of a healthy culture throughout firms, not just on the front line but also in areas such as product development,” the FCA says in its consultation.

At over 100 pages long, the FCA’s draft guidance is comprehensive but it is also open for interpretation.

At the centre of its guidance are its Principles of Business and four key themes: recognising vulnerability and responding to customers’ needs; the value of sympathy; the importance of empowered and knowledgeable staff and addressing communications needs.

It recognises that firm will need to take on the responsibility of interpreting the rules themselves.

While it says it recognises that the guidance might be different for each firm it also stipulates that: “Firms that operate in markets that are significantly riskier or are more targeted to vulnerable consumers may need to do more and go further than other firms.”

“The vulnerable clients guidance from the regulator acknowledges that situations are often unique and people are all different,” says Matthew Arena, managing director at Brilliant Solutions.

“To do this the guidance needs to give flexibility. The application of the guidance within firms and networks, who implement their own policy and training based on their own interpretation of risk and guidelines thus has the scope to vary greatly,” he says.

“This may create problems but overall it should be seen as a positive because there are many ways in which we can achieve a positive result. It works hand in hand with culture and core principles too. That SEPTEMBER 2020 MORTGAGE INTRODUCER

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REVIEW

FIRST CHARGE LENDER CONSENT said, it is such a vital, complex and high risk area it is always sensible to seek to improve guidance in any way that can make protecting vulnerable clients more effective.”

Fiona Hoyle, head of consumer and mortgage finance at the Finance & Leasing Association, says although the area is a “challenging” one, there’s a lot of good practice in the second charge market already as vulnerability has been high on members’ agenda for some years now.

“In 2017, the FLA and the UK Cards Association published two guides – the first related to debt collection and the second focusing on lending decisions – both of which used the real-world insights of 1,700 front line staff to assemble workable strategies that staff can use to identify and help vulnerable customers,” she says.

“The core issue for lenders will always be identifying which customers are vulnerable. The causes of vulnerability are many and varied, and the impact on individuals will depend on numerous factors. Training for frontline staff is crucial because they will need to use their judgement to make decisions on what is a spectrum of vulnerability,” she says.

Helping such clients “doesn’t come with a rulebook”, says Tolfree, but if firms do their utmost to ensure they do the right thing for such clients. They should be on the right path.

“Vulnerability issues such as health, financial or mental well-being, whether in one’s personal life or indeed when considering a mortgage application don’t come with a rule book, and every person and instance will be slightly different,” he says.

“At UTB we have clear guidance, policy and processes in place and we complete regular training.

If you have followed the documented guidance and believe when all is said and done that it was the right decision for the customer, then you won’t go far wrong,” he says.

REPOSSESSIONS Another area of concern for the industry when it comes to helping vulnerable clients is around repossessions.

The second charge market saw just 101 repossessions in 2019 and 2020 looks to be even lower, due to the current lender ban on repossessions until October.

Borrowers can also request a payment holiday up until this date.

While the ban will undoubtedly act as a lifeline for those still on furlough or restructuring their finances, some are questioning whether this is the best approach.

“We understand why the current ban is in place but it’s a blunt instrument that may not deliver the best outcome for some customers,” says Hoyle.

“In a situation where all alternatives have been exhausted and a customer is still falling into more debt with little prospect of their circumstances improving,

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then repossession remains the most appropriate option,” she believes.

Evans says for lenders, repossession is always a last resort and it will always work with its customers to try and resolve any difficulties to avoid it.

“This is especially important during this time, as given the significant economic impact of the pandemic, many more customers may end up finding it difficult to make mortgage payments than they would have pre-Covid,” he says.

“The repossession ban feels appropriate for the industry at this time and allows financial institutions to ensure they are focused on supporting customers through what may be some of the most challenging times of their adult lives.”

Tolfree says the true scale of the financial impact the pandemic has had on borrowers has still not fully come to light.

“The government didn’t consult with the industry before announcing payment deferrals or the litigation moratorium, so it came as a shock when lenders found out about the measures at the same time as the general public.

“COVID-19 is creating unprecedented health, social and economic challenges around the world and lenders should play their part in supporting customers trying to overcome those challenges. To be frank, lenders should help customers through difficult times anyway, pandemic or no pandemic, but it’s the large numbers of people who may need assistance which makes the current situation unique,” he says.

“The true impact of the pandemic, in terms of arrears and repossessions, will not be seen until government support measures such as furloughing, payment deferrals and the litigation moratorium come to an end over the next few months,” he adds.

HIGH ON THE AGENDA Theoretically, the FCA’s guidance for firms should not be above and beyond what many are already doing.

It has warned that once its final guidance is published this winter it will be checking that firms and particularly senior managers are sticking to it and the second charge industry is likely to be one sector on the FCA’s list.

Among other things on its checklist, the FCA says it will be asking firms to demonstrate the actions they have taken to understand the needs of their target market/customer base and to ensure their staff have the right skills and capability to respond to the needs of vulnerable customers.

It will expect all firms to continually assess their policies and ensure they have the desired outcome.

The issue of vulnerable clients was already high on the FCA’s watchlist before Coronavirus, so it will no doubt feature even more heavily in the current circumstances, which means if firms are not already, they should proactively take heed of its guidance. M I www.mortgageintroducer.com

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SPOTLIGHT

LENDINVEST

Adapt and over c Justin Trowse, director - bridging finance, LendInvest, gives his take on the current state of the bridging market What are some of the main challenges facing the bridging market at the moment?

Following the past couple of months we can expect the industry to face a series of challenges, including ones we’re already observing from an operational perspective.

With lenders racing to meet the post-lockdown pent up demand volumes coupled with the fear of another lockdown period later in the year, it’s unsurprising to see lenders racing to meet the business that’s flowing in at this time.

The economic challenges are also clear. As the government’s furlough scheme comes to an end, the true effects of the crisis with regards to unemployment will become apparent, undoubtedly having a profound effect on demand.

How has LendInvest adapted to these challenges and those presented by COVID-19?

As a business, we were able to move almost seamlessly into an effective remote working environment due to historically investing heavily in our internal technology making working remotely easier for our employees, partners and borrowers.

Whilst it wouldn’t be right to say it’s been ‘business as usual’, we held our nerves and serviced the market needs by staying open for business throughout lockdown, ensuring we were at the end of the phone for our borrowers and providing revised products for customers that needed finance throughout a challenging economic period.

With mainstream lenders pulling away from some parts of the property market what role of the bridging market in helping with the recovery?

The bridging market is a lot more professionalised than it used to be, even two years ago. The importance of staying open for the market to recover is huge.

Staying open enables the market to trade whether you are a broker, investor, developer or a lender; all of which contribute to the overall success of the market and the wider housing market.

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Justin Trowse

www.mortgageintroducer.com

SPOTLIGHT INTERVIEW

LENDINVEST

r come Does government policy need to take this role into account in a more substantial way, and if so, what would you like to see come into force in the coming months?

The government recently announced their upcoming planning reform which is excellent news and a step in the right direction. Of course we will need to see how this works in practice.

The current exodus in the office market with work from home and renegotiation on rents could signal that permitted development (PD) may be in line for a big come back. The retail market was suffering before the effects of COVID-19, so if this can be repurposed with little friction, it could also be hugely beneficial.

The government has set out plans to overhaul the outdated planning system and reform the way the country builds. How big an opportunity is this for lenders, brokers and borrowers?

The government is currently targeting 300,000 new homes a year across England to meet current demand, so this will be a large opportunity for all concerned.

There is still a major deficit in the supply of quality and affordable houses in the UK, so the more the industry can do to accommodate this, the better off the economy as a whole will be.

Thirty years ago small builders were responsible for 40% of new build homes compared with 12% today, this needs to swing back towards SMEs in order to create the competition needed to push more and higher quality opportunities.

What are your predictions for how the market might change going forward into 2020 and beyond?

As we approach the Winter months we must be mindful that the pent up demand will likely subside and the knock on effects of an uptick in unemployment rates set in.

The start of 2021 will be the tester, as the SDLT reduction is currently scheduled to be redacted in March, and the full effects of COVID-19 will start washing through assuming a net reduction in government aid.

Some of the smaller lenders with smaller books and less experience that have gone up the risk curve to battle margin compression will come off worst hit.

However as we approach the Summer next year, we hope to see business move towards a new normality with house prices and business volumes stabilising. www.mortgageintroducer.com

Will the role of specialist lenders willing to take on cases with adverse credit/arrears etc grow now that more and more people are facing financial disruption?

Bridging has never been a tick box exercise, we listen to the story and weigh up the merits of each deal - this approach is now more important than ever.

For example, we have plenty of developers that we have lent to that were affected in the 2008 financial crisis, so if the components of the deal make sense, we are willing to support that client.

Prior to the pandemic, what big trends were on the cards in bridging, and have these changed, or been put on hold?

It would be fair to say that commercial deals were and are our forte, such as development exit and planning plays.

A lot of lenders have lost the funding or nerve for this, but we understand the planning process and upside in these sorts of projects.

The best mix is strong security, an experienced borrower, supported by a team of experienced professionals, with an experienced lender.

What plans or developments are on the horizon for LendInvest?

The competitive advantage our technological infrastructure gave us over lockdown means in the near future we will be focusing on developing that technology further, and using it to ramp up our reach as a lender, and volumes as we move towards 2021.

We are also looking to keep focussing on - and improving - the relationships between our experienced team and our clients.

We recently launched our Structured Property Finance team headed up by Tom Madden, which will have the sole focus of dealing with larger and more complex property funding solutions through a personal service.

LendInvest’s ambition is to be recognised as a top tier bridging lender, with the technology and support in place to process large numbers of loans, and the experience and resources to be able to meet bespoke funding requirements on larger projects to support property SME’s.

What key message would you like to get across to brokers wanting to use LendInvest?

That we are well and truly open for business.

With a talented, expert team and one of the most diverse funding bases amongst lenders in the marketplace today, we are excited to see what the next couple of months has to bring, and as always, we’re ready for it. M I SEPTEMBER 2020 MORTGAGE INTRODUCER

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LENDINVEST

Transparency and customer-centric processes are a perfect cocktail for meeting market demand Andy Virgo director for buy-to-let, LendInvest

I

WHAT ARE YOUR PLANS?

t has been a difficult couple of months for the industry. The effects of the COVID-19 crisis have permeated each firm in a range of ways, effects that will be felt for a long time to come.

There’s little doubt that the housing market has experienced a mini-boom following the loosening of lockdown measures across the UK. As restrictions lift further and businesses receive much needed support from the government they have been requesting for months, there are several reasons to be optimistic looking forward. It’s not just lenders and residential homebuyers that have rushed back, but property investors too.

We know that investors are keen to buy. The latest data on the ESIS generated through the Mortgage Brain sourcing systems show that buy-tolet purchase ESIS have sat at around 9% higher than the levels seen before COVID-19, for nine weeks in a row.

And brokers using the Cherry forum have reported seeing sharply increasing demand levels from landlords for buyto-let mortgages.

Property professionals are well aware that the fundamentals of the market haven’t changed, and that property remains a phenomenal asset class, even if the world has been shaken by a pandemic. As such, they see an excellent opportunity to expand their portfolios.

But one thing that investors and their brokers do need right now is some certainty, a more solid understanding of precisely what funding is going to

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be open to them. And that’s something we are trying to provide at LendInvest through the launch of our new appetite statements.

An appetite statement outlines to landlords what sort of funding LendInvest would be happy to provide them with, not just for their current case but for future purchases and remortgages across their entire portfolio.

When applying for a buy-to-let mortgage, the borrower can request an appetite statement. This essentially adds an extra step to the underwriting process, where they have a discussion with the underwriter about their experience as an investor and their plans for the future, such as the areas they are looking to invest in and what sort of investment properties they are focusing on.

It’s not about asking landlords to present a business plan, or put some form of presentation together, but rather get an informed insight into their aspirations, their mode of operating, and what sort of prospect they are likely to be.

The underwriters can then put together an appetite statement, detailing what sort of funding we would be prepared to offer that borrower across their portfolio, and at what sort of loan-to-value. Those appetite statements are then checked every six months, to ensure that they remain accurate.

We believe that appetite statements could make a significant difference to borrowers, providing a significant helping hand when it comes to planning out their financial strategy for their portfolio, whether that’s adding new investment properties or refinancing on existing ones.

MORTGAGE INTRODUCER SEPTEMBER 2020

If they want to purchase a new investment, they know from the very outset what sort of funding facility is open to them if they use LendInvest ‒ from there it’s simply a matter of choosing the right product.

REDUCING BROKER WORKLOADS

There are clear benefits to appetite statements for brokers too. Brokers know only too well that one of the first questions they have to deal with from clients, whether they are first-time borrowers or have a large investment portfolio, is ‘how much can I borrow?’.

These appetite statements answer that question, not just for right now but potentially for the months and years to come as well.

Not only will the broker have a good idea of how likely an application from the client is to be approved, but they will also be in a more informed position on precisely how much can be borrowed, allowing the adviser to focus their efforts on identifying the right product for the client, whether that’s from LendInvest or someone else.

What’s more, having gone through that initial interview with the underwriter, the application process once an investment property is identified later on is going to be more straightforward as the team understands the borrower and their intentions.

We also believe that appetite statements will help brokers become more familiar with our lending processes. Advisers are only too aware that each lender has their own, unique way of working, and switching between those different processes for different clients takes time and effort. These appetite statements will help drive that familiarity with our processes.

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ADVERTISEMENT INTERVIEW FEATURE

LENDINVEST STAMP DUTY REFORM PROVIDES OPPORTUNITIES FOR LANDLORDS

Focus on improving our processes internally is particularly important at this time due to the effect recent government policy changes has had on the market.

Traditionally, stamp duty has not only served as a barrier for increasing transaction volumes in the market, but remains a disincentive for older homeowners considering downsizing, which simply reduces the amount of suitable available stock for those secondand third-time purchasers and clogs up the entire market.

In 2018 we saw steps in the right direction with the removal of stamp duty for first-time buyers on purchases of up to £300,000 and this Summer the

Chancellor of the Exchequer announced a temporary, but much needed abolishment of stamp duty on homes up to £500,000 until March 2021.

This stamp duty holiday has provided a welcome relief for buyers in the current climate, and it’s a smart legislative decision made by the Chancellor to inject mobility into the housing market and provide a much needed remedy to the ‘wait and see’ approach that many buyers may have opted for due to recent market uncertainty. Each of these initiatives is an encouraging step towards a more optimistic future for the industry; and importantly a clear message that this government is well aware of the issues faced by the housing market in light of the COVID-19 crisis, and is prioritising taking material action to tackle them.

KEEPING THINGS TRANSPARENT

It’s undoubtedly been a tricky few months for brokers and their buy-to-let clients.

While the demand is clearly still there from investors, advisers have had to navigate uncertain waters, with lenders pulling products swiftly and taking a more cautious attitude towards their activity.

But for any lender that values the intermediary community, transparency is key. Brokers want to deal with lenders they can trust, and who make dealing with them as simple as possible.

It’s something we strive for in everything we do, and we believe that appetite statements are an innovative way to bring that transparency to brokers and borrowers alike. 

MI

www.mortgageintroducer.com

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SPECIALIST FINANCE INTRODUCER

FIBA

Evidence of increasing broker activity Adam Tyler executive chairman, FIBA

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here are plenty of contradictory reports concerning the levels of specialist finance lending being achieved at the moment.

While some lenders are claiming that they have never had it so good, there are others who are not quite ready to fully engage with the market, but most are considering their first tentative steps back.

If we look at the reality of the situation, estimates tell us that only about 40% of commercial lenders are fully engaged in the sector at present.

However, that is not because of a lack of demand but rather that funding, criteria restrictions, an inclination towards caution or just not being able to operate effectively without an officebased workforce are to blame for the majority not being fully operational.

The evidence suggests that out of the 40% who are lending, some are struggling to cope with the vast quantities of enquiries they are receiving – another sign that demand is on the up.

Having spoken to many of our partners on the FIBA lender panel, I am sure that some, and you will have

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seen this in the press, have had record months over the past quarter.

However, to put the matter beyond doubt, I talked to the true barometer of activity in the sector, namely the legal firms on our professional partners panel.

All of them had noted a heavy increase in the number of transactions in the specialist finance area.

So, while we await some official statistics, let’s be positive as all the circumstantial evidence points resoundingly to the fact that specialist property finance demand is looking healthy!

LATERAL THINKING IS VITAL

Living in interesting times as we are, I am reminded that extraordinary situations call for different thinking.

I think it is time for all of us who are actively engaged in finding finance for customers to be considering how, if we look carefully, we can change our mindset and methodology in order to be better aligned to cope with the present reality of doing business in this market.

Clearly, from what I have already talked about, we have the evidence that demand for finance has not fallen off a cliff, in fact just the opposite. The challenge though is not only to know where to look but also to be following the latest lending trends to take advantage of new ideas.

MORTGAGE INTRODUCER SEPTEMBER 2020

One such innovation is the ability of lenders to be able to provide facilities which start effectively as short term loans and then can be converted to longer term solutions with the same lender, removing the need to search and change providers with all of the contingent challenges that can represent.

LOOKING BACK TO SEE HOW FAR WE HAVE COME

On 17 January 2018, FIBA held its inaugural annual conference in Central London and it attracted a full house of specialist finance professionals, press and industry figures from lender and service providers.

To be fair, I know some of the delegates were curious as to what this new trade body could provide to its target audience of brokers that was not already available elsewhere.

We started from a strong position by having the backing of SimplyBiz Group. This gave us the ability to plan and execute the rollout all the services which we wanted to develop for members in a timescale which meant that everything could be properly thought through and tested before being launched.

I am delighted to say that all the services I talked about developing at that first conference, which had seemed like a long time ago, have, just over two and a half years later have all been realised.

Our lender panel is growing all the time, our Professional Partners Panel of legal and survey firms was the first of its kind enabling members to gain access to many lenders which might have been denied to them outside FIBA, our compliance suite is in the top tier of schemes and the FIBA PI scheme is proving to be of immense value to many who have found increasing difficulty in sourcing cover at a reasonable rate.

However, we are not resting on our laurels! We will be making announcements over the next few months, which will further help members and those that want to join us to revolutionise their working practices and increase business levels as we access the wealth of technology available throughout the Group. M I www.mortgageintroducer.com

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Just call us on 0344 770 8032 Š2019 Foundation Home Loans is a trading style of Paratus AMC Limited. Registered Office: No.5 Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA. Registered in England with Company No. 03489004. Paratus AMC Limited is authorised and regulated by the Financial Conduct Authority. Our registration number is 301128. Buy to let mortgages are not regulated by the Financial Conduct Authority. No limit on portfolio size, subject to maximum borrowing of £3 million with Foundation Home Loans. Calls may be monitored and recorded.

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Just turn to Foundation, and it’s Solution Found. ©2019 Foundation Home Loans is a trading style of Paratus AMC Limited. Registered Office: No.5 Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA. Registered in England with Company No. 03489004. Paratus AMC Limited is authorised and regulated by the Financial Conduct Authority. Our registration number is 301128. Buy to let mortgages are not regulated by the Financial Conduct Authority. No limit on portfolio size, subject to maximum borrowing of £3 million with Foundation Home Loans. Calls may be monitored and recorded.

foundationforintermediaries.co.uk

For intermediaries only