Mortgage Introducer May 2019 by mortgageintroducer

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MORTGAGE May 2019 £5.00

INTRODUCER www.mortgageintroducer.com

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A matter of Principal Steve Hughes, Principality chief executive, reveals all ROBERT SINCLAIR

THE OUTLAW: BARCA-CHOKER

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Publishing Editor Robyn Hall Robyn@mortgageintroducer.com @RobynHall Managing Editor Ryan Fowler Ryan@mortgageintroducer.com @RyanFowlerMI Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com News Editor Ryan Bembridge RyanB@mortgageintroducer.com Reporter Michael Lloyd Michael@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com @mortgagechat Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Manager Francesca Ramsey Francesca@mortgageintroducer.com Campaign Manager Joanna Cooney joanna@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com

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May 2019 Issue 130

MORTGAGE INTRODUCER WeWork c/o Mortgage Introducer, 41 Corsham St, London, N1 6DR Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of Mortgage Introducer Ltd.

Our incompetent government Not content with the wrecking ball that is Brexit, our Government leaps again from the lurch – this time promoting one mortgage adviser over another. The recently published How to Buy & How to Sell homes guides are fantastic and that’s without question. However, what ourselves and the Association of Mortgage Intermediaries believe, is that it should not be the job of Government to promote one advisory firm over another – in this case Which? Mortgage Advisers. On 7 May 2019 the Ministry of Housing, Communities and Local Government published these new guides. AMI has been is discussion with MHCLG during the creation of these and since publication. It has asked for alterations to the documents but some have been refused. For its part, AMI is advising its member firms of the content of these documents as they may be unaware of the potential impact. Within the text there a number of embedded links to a membership-based consumer charity. When taken to the linked pages users will then be offered the option to talk to one of the mortgage advisers in their connected commercial arm. AMI has asked for sight of any due diligence, tendering processes or internal approval processes, but have not had this shared. This is deeply concerning. AMI, and Mortgage Introducer, will continue to raise our joint concerns over an implicit endorsement of one advisory firm over others and lobby to have this changed. As Robert Sinclair, AMI chief executive said earlier this month: “We are extremely disappointed at the approach taken here on what are an otherwise excellent series of documents. However, we cannot support or endorse the promotion of one advisory firm, even indirectly at the expense of others. AMI has always championed a level playing field on all matters and will continue to do so.” We couldn’t agree more and hope that MHCLG will reconsider its approach and move to a more balanced position. There are thousands of competent advice firms out there. It really does beggar belief that just one should be chosen over the other. The next thing you know the Government will be asking us whether we want to be in Europe or not. Oh, wait a minute…

4 AMI Review 6 Market Review 8 Recruitment Review 10 High Net Worth Review 12 London Review 13 Self-Build Review 15 Buy-to-let Review 20 Protection Review 27 Advice Review 28 Equity Release Review 32 General Insurance Review 36 Conveyancing Review 41 Technology Review 44 The Outlaw

What a shower

46 The Bigger Issue

We ask our industry experts: Should seconds regulation be combined with sub-prime?

48 Cover

It’s the principal: Ryan Bembridge talks to Principality Building Society

54 Round-table

Our panel, sponsored by Barclays, get to grips with tech

62 Loan Introducer

The latest from the second charge market, with commentary from Steve Walker and analysis from Natalie Thomas

68 Specialist Finance Introducer Bridging, debt and FIBA

72 The Last Word

It’s the mortgage Accord with Jeremy Dunscombe

74 The Hall of Fame Oh, not again

The specialist lender you can bank on The specialist lender you can bank on

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MAY 2019

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Review: AMI

Slaying the dragons of the MMR In deciding as part of its Mortgages Market Study that the market needed help by revising advice and selling standards, the FCA has made some interesting statements and assertions. As one of the few still in their role from the inception of the Mortgage Market Review, I find some of the rewriting of history fascinating. In section 2.20 and from section 3.20 onwards, the FCA’s CP19/17 consultation paper states that they did not intend under MMR to infer that it should be more difficult to complete execution-only business. This convenient re-writing of history ignores that there must have been and were very strong reasons why in 2012 the FCA drafted the requirement for boards of lenders to carefully consider and approve the application, use and scale of this approach. Indeed, in so doing lenders have consistently not allowed intermediaries access to execution-only, nor have traditional brokers wanted ac-

Robert Sinclair chief executive, Association of Mortgage Intermediaries

cess to this channel. Such intermediaries recognise that in communicating with a consumer they will end up advising on the most suitable product. Most lenders have found methods of mixing execution only into their product transfer mix and have been pursuing this happily to the extent of over £70bn of transactions in 2018. Accordingly, it is fascinating to ask what is driving these new demands. The issue is that this particular dragon has to be slain to move on to the next part of the Game. Under MMR it was ruled that firms should not encourage consumers away from advice – so despite many firms adopting such practices – differential pricing and telling customers about follow-on products with a simple tick box or keyboard click completion – these rules are also to be obliterated. We should not worry however because the FCA is keeping the “in-

teraction” rule, whatever that now means, given the prior changes. A regulator that is meant to protect consumers is going a funny way about it. They are exercised about how poorly the GI markets are delivering transparency, but want to change the mortgage market rules to replicate that market. What is the use of stressing that lenders should give details of all their products that a customer is eligible for on a product transfer rather than their version of key highlights? Unless the FCA is prepared to supervise this standard, then it is a waste of paper. This reduced menu of product is being used “en masse” daily and ignored as there is seen as limited consumer detriment. The proposals to require brokers to justify why they may not have selected the cheapest mortgage available looks straightforward on the face of it. However it remains dependent on how much data and criteria

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Review: AMI

are input to any sourcing system and agreement with the consumer how relevant these are in relation to price. This risks creating a complex paper chase without more detailed guidance from the FCA about what the core baseline for an assessment might be. It appears that justification for all this is coming from fears that firms do not want to set up filtering based on objective criteria. These are such as loan amount, property value, term, interest rate type and fees. As these have existed for years through base line affordability checks with PCW’s, lenders and many brokers – instead of just telling firms the rules allow this we have proposals for significant relaxations of rules being justified by irrational fear. This is all hung on the data that said that 30% of consumers could have got a cheaper deal. However, two thirds of those were justified by the firm either not having the lender on panel or the deal only being available direct or through limited distribution. No messages here to change these rules and give the broker and consumer more access – just rule changes to destroy advice and give the Throne to the boys from fintech who do not want to carry full accountability. Lenders should tread carefully in allowing them licence to sell their products – as it will not be advice and liability will stay in the regulatory perimeter.

Trapped in a three way tie The new affordability tests for existing borrowers proposed on FCA CP19/14 will allow lenders to disapply many aspects of the MMR affordability rules which have restricted the options of some borrowers. It is proposed that the new simpler rules can be applied to any mortgage customer provided they are not borrowing more money. Lender product fees do not count as new money, nor will the FPC stress testing at a higher revert to rate. The revised rules will allow a lender or consumer to extend the term of the mortgage to make it more affordable and not apply the old rules, but the consumer should be made aware of the new total cost of borrowing. Under current market conditions this will work for most consumers on a reversion rate or coming off

a long-term deal as they will be able to secure a cheaper loan. In a market where rates are rising, then it may be more difficult and in order to benefit from the reduced affordability tests then they may have to be allowed to revert to their SVR to move lender as the FCA rules already allow product transfers under a version of this approach. As lenders will have to keep the stricter approach for new or additional borrowing this adds layers of complexity. Will they keep the existing MMR rules for times of rising rates or flop to the new rules relying on extending term to deliver the results in market share they require? These changes go to the heart of the market as more lenders look to retain their customers whilst a remortgage for many might still be

Review: Housing

The bounce will come after Brexit Lending levels have inevitably been affected by the countdown to Brexit in the early months of 2019. Its looming shadow has also resulted in an understandable lack of activity from some buyers and sellers across the UK. So how is the housing market currently performing pre and post the latest Brexit delays?

Housing market

The RICS Residential Market Survey for March showed a subdued housing market, aligned with the prediction that this lack of momentum is likely to continue for a while longer. March saw enquiries from new buyers produce the eighth negative reading in a row, with 27% of respondents seeing a fall in buyer demand. As buyer interest declined, 24% more surveyors saw a fall in agreed sales. This is consistent with an expected drop in the HMRC measure of transactions – currently operating at around 100,000 per month – over the coming months. The ongoing decline in new instructions and new property coming on to the market continues, having become progressively weaker in each of the past four surveys, falling from the net balance of -20% in December, to -30% in March. However, despite the reduction in agreed sales, average stock levels on estate agents’ books remained at 42 properties per branch and there were suggestions of a little more optimism in the air, with sales anticipated to rise over the course of the next year.

Craig Calder director of intermediaries, Barclays Mortgages

Property type

The index highlighted the family home sector to be outperforming other sectors, in terms of some key metrics. These properties were cited as holding their value better than most, coming to the market at asking prices, on average, 0.7% higher than a year ago, compared to the national average fall of 0.1% (for all properties). Owners of this property type were also reported to be more willing to come to market and more likely to sell than the national average. Detached living remains a dream for many. The popularity of detached properties has seen their prices rise by more than £125,000 in the past 10 years. Data from online estate agents Housesimple found that the average price of a detached house in the UK was £252,473 in January 2009. However, in the current market, a detached property will cost buyers an average of £377,945, an increase of £125,472 or 50% in a decade. At the other end of the housing scale, there has also been a signifi-

House prices

Looking at March house prices, 24% more surveyors saw a decline rather than rise in prices at a headline level. This was up from -27% in February, and while it ends a streak of eight consecutive months of declining responses, it still points to a modest fall in house prices at a national level over the next couple of quarters. London and the South East continued to display the weakest sentiment regarding prices, with Scotland and

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Northern Ireland the only parts of the UK to see sustained price growth on a consistent basis over the past two months. Looking ahead, at the national level, 15% more respondents anticipate that house prices will be higher in 12 months’ time. It is usual for properties to see a price rise as the spring moving season gets under way, but April’s 1.1% (+£3,447) uplift was said to be the highest in April since 2016 and the largest monthly rise seen since March 2018. This is according to the latest Rightmove House Price Index which also outlined that, despite some headline falls, market activity remains resilient with would-be buyers and sellers still having housing needs to satisfy, especially in the family home sector – three and four-bedroom properties (excluding four-bedroom detached).

MAY 2019

cant increase in the cost of an average first-time buyer house, resulting in raised monthly and annual costs for first-timers taking out mortgages.

Affordability

AmTrust’s latest Mortgage Loan to Value Tracker showed that the average first-time buyer house has risen from under £169,000 to over £177,000. This has led to increased monthly and annual costs for borrowers who can put down either a 5% or 25% deposit. The monthly mortgage cost disparity for average first-time buyers seeking averagely priced homes continues to be high, with 95% LTV borrowers continuing to pay close to 50% more for their mortgages than those at the 75% LTV level. And this with average mortgage rates continuing to fall. For a 95% LTV mortgage, rates dropped from 3.23% in Q4 last year to 3.03%, while there was also a reduction in average rates for 75% LTV borrowers, with a quarterly decrease from 1.75% to 1.68%. The rate differential between 75% and 95% LTV loans has therefore continued to narrow, down to 1.35% from 1.49% in Q3 last year.

Brexit bounce

This raft of data highlights a stable housing market but also a tough one for borrowers, even when considering healthy competition from lenders in terms of rate, affordability and availability. Activity levels are slowly rising, and the market has gained a little bit of momentum in recent weeks. This is not unusual in the spring months but could also be a result of the latest Brexit extension. This extra delay may generate a small transactional bounce for the housing market, but it remains a highly price sensitive area with caution still evident amongst some buyers and sellers. As such, it will be interesting to chart Q2 activity across all property types to see just what effect this might have. www.mortgageintroducer.com

Review: Recruitment

Adverts are key role to address the gender pay gap The gender pay gap in financial services currently stands at 23.25% in favour of men and yet research shows that the sector, at worst, comprises a 60% men 40% women split. Therefore, it is evident that there is an imbalance of men to women in the senior, higher paid roles. Indeed, the Gadhia review of 2016 confirmed this. Whilst this is undesirable and the sector is seeking ways to redress this, we may be facing an ongoing challenge of finding that applications and shortlists are still, inevitably, dominated by men. Therefore, whilst we may be keen to recruit more women, particularly in senior roles and whilst we might be welcoming change and fairer representation with open arms, we may still be finding that the ‘gene pool’ of applicants is limited and male heavy. Our desires and intentions may be good but not being realised in practice. So what can we do in the here and now to redress this? I suggest that our job advertisements might be something to look at in closer detail. Without even realising it, we are probably all using language that is gender coded, even if very subtly. Society has clear expectations about what men and women ‘are like’ and also how they differ and this impacts on the language that we use. For example, think about words such as ‘bossy’ and ‘feisty’ – are these words used frequently to describe men? This linguistic gender coding also shows up in job adverts and interestingly, research has shown that it actually puts off women from applying for job roles that are advertised with what we could describe as masculine-coded language. Indeed, the use of certain words has a discouraging effect and might explain why, in spite of your organisation’s best efforts to encourage a diverse and balanced workforce, there are not enough women even applying for roles, let alone being ap-

MORTGAGE INTRODUCER

Clare Jupp people development director, Brightstar Financial

pointed. The wording and content of adverts is something that many organisations are starting to look at more carefully and I am certainly interested by some research that I came across describing a gender decoder for adverts. This tool was inspired by a research paper called Evidence that Gendered Wording in Job Advertisements Exists and Sustains Gender Inequality. It allows you to put your advert through the decoder tool and then tells you whether it is masculine, feminine or neutral by means of analysing word and phrases that have been used. In the paper that sits behind the design of the decoder tool, the researchers showed job adverts to men and women which included different kinds of gender-coded language. They then recorded how appealing the jobs seemed and how much the participants felt that they belonged in that occupation.

“Without even realising it, we are probably all using language that is gender coded” Their results showed that women felt that job adverts with masculinecoded language were less appealing and that they belonged less in those occupations. For men, femininecoded adverts were only slightly less appealing and there was no effect on how much the men felt that they belonged in those roles. I conclude from this that the wording of and language used in job adverts is crucial if you are aiming to attract more female applicants, for it is they who will be deterred If the linguistic gender coding suggests it is a job for the boys. The tool that I have described checks job adverts for the appearance of any of these words, then calculates the relative proporMAY 2019

tion of masculine coded and feminine coded words to reach an overall verdict on the gender-coding of the advert. On the ‘masculine’ list are words such as competitive, decisive, ambitious, courageous, driven and self-confident. Conversely, on the ‘feminine’ list are words such as interpersonal, cooperative, collaborative, inclusive, loyalty and supportive. The dilemma of attracting less female applicants may not of course, all be in the language of adverts as such but also wrapped up in the fact that women are naturally less risk taking and courageous than men. Indeed, some research suggests that if they are not at least 95% certain that they meet the job criteria for a role, they will be deterred from applying. Men, on the other hand, will press on even if they consider they can only tick 70% of the required boxes. Therefore, with the ‘risk factor’’ being significant to job applications, I suggest that it may be worth trying to add a ‘footer’ where you state that applicants may not meet all criteria but should feel encouraged to apply. It would also be worth mentioning that flexible working arrangements will be considered. Finally, at Brightstar a key quote that I’m well known for using is ‘we hire for attitude and train for skill’. I think this approach is really important as the emphasis is on finding the right ‘cultural fit’ rather than the applicant with the CV that matches the criteria the best. Thus, perhaps this is something that job advertisements should state. My final word on this issue would be that becoming a Women in Finance signatory and subsequent use of the ‘Women in Finance Charter’ logo could be a simple but excellent way of attracting more women to your organisation. It says so much about your workplace culture and it is a statement of intent about your business. It heralds your commitment to safeguarding and promoting diversity (in all forms) and it gives a clear message that your organisation is committed to progressing women’s careers into the senior ranks. www.mortgageintroducer.com

“Platform does things differently” Sue Beeston, Broker We’re a little bit different from other lenders. We offer expert support with a human touch, and a simple process that’s transparent and fair. In fact, we do things differently every step of the way. We’ve been chatting with brokers to find out what that means to them. “We consider them almost like partners”

“They’re totally transparent”

“Their difference within the market is that they listen”

Peter Atherton, Broker

Jane King, Broker

Neil Stephens, Broker

We bring a human touch

We’re transparent and fair

We’re always listening to you

We know how precious your time is, so we won’t waste it. If we can’t accept your case, we’ll let you know upfront to avoid any delay. We also endeavour to give you 48 hours’† notice if there are any product rate changes.

Our service is built around you and your needs. In fact, we continuously evolve our processes based on your feedback – which we ask for in real time. It’s why we’ve changed the Declaration Form process, introduced a range of new retention products and launched our product transfer.

We know how much you value good customer service with a personal touch. So we’ve increased the number of people in our support teams, to make sure you always get the best service possible. Better still, we’ll answer your calls on average within 30 seconds.^ That’s why we’ve been voted the No. 1 ‘Best Mortgage Desk Team’ for the third time running.*

See more of our broker stories on

Call 0345 070 1999** to find out more or talk to your BDM.

www.platform.co.uk Lines are open between 9am and 5pm Mon, Tue, Wed & Fri and between 10am and 5pm on Thur. The Co-operative Bank p.l.c. is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (No.121885). The Co-operative Bank, Platform, smile and Britannia are trading names of The Co-operative Bank p.l.c., P.O. Box 101, 1 Balloon Street, Manchester M60 4EP. Registered in England and Wales No.990937. Credit facilities are provided by The Co-operative Bank p.l.c. and are subject to status and our lending policy. The Bank reserves the right to decline any application for an account or credit facility. The Co-operative Bank p.l.c. subscribes to the Standards of Lending Practice which are monitored by the Lending Standards Board. The Bank reserves the right to change or withdraw the donation arrangement at any time. Centrepoint is a registered charity in England and Wales, No. 292411 ^Calls taken between Jan and Aug 2018 on Lending Policy queries and password resets on 0345 070 1999 were answered on average within 30 seconds. †Product rate changes only. *Voted Best Mortgage Desk team by brokers who have recently placed a case with Platform, in the BVA BDRC survey in September and October 2018. **Calls to 03 numbers cost the same as calls to numbers starting with 01 and 02. Calls may be monitored or recorded for security and training purposes.

Review: High Net Worth

Bonus season can be good news for mortgage brokers For many bankers and professionals, the bonus season is in full swing and such liquidity events can represent an excellent opportunity for mortgage brokers. Annual or quarterly bonus payments can make up a significant slice of a high net worth individual’s (HNWI) pay packet and as such, clients will want to ensure they are factored into their mortgage assessment. The most recent figures from the Office for National Statistics (ONS) show that in the financial year ending 2017 (April 2016 to March 2017), the combined value of all bonuses paid in Great Britain was a record £46.4bn, growing by 6.5% in the financial year ending 2016. The largest contributor to the level of bonuses was the financial and insurance activities industry, at £15.0bn, with 72.7% (£10.9bn) of total bonuses paid between December 2016 and March 2017, according to the ONS. This figure can be higher still depending on the client’s position and the performance of their bank. Salary benchmarking site Emolument.com analysed the 2017 bonuses of 1,640 London bankers and found that while a typical bonus for an analyst is £5,000, based on a £50,000 salary, a director can expect a bonus of £115,000 and a salary of £170,000. The higher the bonus, the more likely it is that the HNW will seek a broker’s advice on how best they can utilise their payout when buying property.

Peter Izard business development manager, Investec Private Bank

The bonus culture

It may come as a surprise to hear that bonus payments still constitute such a prominent part of bankers’ salaries, given that in 2014 a cap was introduced on such payments. Bankers and their bonuses were the subject of much condemnation

MORTGAGE INTRODUCER

MAY 2019

by the press in the years following the credit crunch, especially in light of the bank bailouts and subsequent rescue packages. As a result, the European Union (EU) brought in legislation in 2014 which capped bonuses at 100% of an employee’s salary unless at least 65% of the firm’s shareholders approve an increase to 200% of salary. The move at the time was criticised by many within the UK, including Bank of England governor Mark Carney who was concerned the cap would lead to increased basic pay and limit the scope for renumeration to be clawed back, if errors were later to occur. Former Chancellor of the Exchequer George Osborne considered a legal challenge against the move, arguing it would be self-defeating. It has even been speculated that in light of the UK’s withdrawal from the EU, the cap on banker’s bonuses might be revoked. Whether the introduction of the cap was or was not successful is another matter, but it certainly did not seem to dent the overall pay of high earners in the UK. A recent report from the European Banking Authority, found the UK had the largest proportion of high earning bankers of anywhere in the EU in 2017. According to the report from the European Banking Authority, 73.41% of the total number of high earning bankers – those that earned over €1m (£847,523) in 2017 were based in the UK. Overall, there were 4,859 bankers within the EU that received a pay packet of over €1m, including bonuses in 2017, up from 4,597 in 2016. It looks like banker’s bonuses are here to stay and there’s a good chance such clients will be looking to the intermediary market for mortgage advice, making it vital brokers are aware of the options for such clients.

Factoring a bonus into a mortgage affordability assessment is often easier said than done, with some mortgage lenders treating bonus payments as second-class citizens. Bonus payments can present problems for some lenders – they can be irregular, performance based and unpredictable. Some lenders will only take into consideration 50% of a bonus payment when assessing a mortgage application, whilst others perhaps nothing at all.

The need for advice

Investec Private Bank, however, is well versed when it comes to assisting clients with large bonus payments and incorporating these into the mortgage assessment. In fact, bonuses are really just the tip of the iceberg when it comes to the forms of remuneration we can handle. In my article last month, I looked at how private banks can help professionals who receive carried interest payments, and bonus payments are really just another strand to this. HNWIs often have incomes comprising of not just bonuses but carried interest, dividends, stocks and shares and other investments. Part of a HNWI’s salary may also be deferred. As part of the 2014 EU legislation, the bonus payments of retail asset managers must consist of at least 50% shares - 40% of which should be deferred for three years. Such complexities can be problematic for some lenders, however private banks have experience of working with HNWIs and their varied income structures. We can also structure a mortgage product to work alongside bonus payments, for example, using the bonus to pay down an interest-only mortgage or allowing the client to make a one-off payment to reduce their overall rate or loan-to-value (LTV). A private bank is able to take a wider view of the client’s finances than perhaps a retail lender can and by looking at the bigger picture we can assess each case on its merits. www.mortgageintroducer.com

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01/05/2019 14:49

Review: London

The market, much like the weather, is slowly warming Spring has sprung, the sun is out and the clocks have come forward. We recently enjoyed some record Easter temperatures across the UK doubtless and many of us will be awaiting news of buyer activity in what traditionally is an important time of year for the property market. Certainly in recent months instructions have risen to a point that the numbers suggest this is less a false dawn and more a baked in trend. In support of this we have already seen a bounce in the property market, even in London. Transactions ticked up in March, with HMRC’s official figures showing that on a seasonally adjusted basis there were 101,830 residential transactions in the month, a 1.4% rise from February, and a 6.8% increase annually. Partly this can be put down to the rather quieter than usual start to this year – Brexit, or Westminster’s apparent inability to get on with Brexit, is weighing on activity in the purchase market. Those who can hang on for a bit are choosing to, leaving stock levels tighter than is usual for this time of year. That said, the buyers and sellers who are in the market are serious about exchanging, meaning less speculation and more action from each one. Prices remain surprisingly robust and where they have softened, for example ordinary family homes and flats in zones 3, 4 and outwards, it is not by much to be honest. The average figures we see have in recent times been dragged down by pressure on super prime prices, but this has always been a much lumpier market than mainstream residential, and far more vulnerable to bumps in liquidity. Even so, demand from international buyers remains reasonably robust given the political uncertainty lingering over this year. A weaker pound and the renewed commitment from the government to support tier one investor visas have encouraged investors abroad to

MORTGAGE INTRODUCER

Robin Johnson managing director, Kinleigh Folkard & Hayward Professional Services

MAY 2019

consider British bricks and mortar as a sensible place to park money. The UK remains a global ‘go-to’ safe haven with an enviable education system for foreign buyers and settlers. The rental market in the capital is also performing well. According to the latest from Rightmove, London’s average asking rents have risen 8.2% in the past year, with the average rental property in the capital now averaging a record £2,093 per month. The 8.2% increase is the highest annual rise in London since Rightmove began reporting this data back in 2012, while average asking rents in London are up 2.9% on last quarter alone. This uptick in fortunes follows the sell-off of less profitable buy-to-lets triggered by the reduction in tax relief on mortgage interest. After a flood of properties coming onto the market from April 2016 onwards, most landlords who have chosen to sell have now done it. The second half of last year also saw a slight bump in stock from this source, as January saw landlords file the first tax return to include a drop in relief. These properties have now largely moved back into the homeownership market, accounting for the rise in the number of first-time buyers at the end of last year. We may yet get further departures from the market owing to the promised repeal of sec-

tion 21 evictions but I expect that to be minimal among the professional portfolio landlords. Those landlords who remain in the market have now largely rebalanced their portfolios, shedding properties with skinny yields and reallocating equity to bring down mortgage costs elsewhere. This accounts for the relative movements we have seen in price in the capital. Central boroughs including Westminster, Kensington & Chelsea, Islington, Hackney, Lambeth and Tower Hamlets have historically had more rental stock; the past two years have seen much of this come back onto the market, putting downward pressure on prices. Boroughs further out of town however remain resilient. Barking, Ealing, Havering, Hillingdon, Newham and Sutton – all areas popular with families and first-time buyers – have seen prices rise over the past year. It’s far from panic stations yet. The shifting terrain for buy-to-let has produced considerable fallout, but landlords who have stuck it out have also benefitted from the exit of so many of their peers. Demand is outstripping supply with the number of available rental properties in the capital down by 33% compared with two years ago, while available rental stock has dropped 13% for the rest of Great Britain. This has supported the rise in asking rents, which is perhaps fortuitous timing given the imminent Tenant Fees Act which will cap deposits at five weeks and limit tenant fees. As we head towards summer, the market much like the weather is slowly warming.

www.mortgageintroducer.com

Review: Self-build

Your support and expertise could boost self-build Britain’s housing shortage is as acute as ever, in spite of last year’s new build rate hitting its highest level in years. Developers are unable or unwilling to meet government housing targets already, and with the on-going uncertainty around Brexit the delivery of new homes is likely to slow this year. Indeed, the latest Markit/CIPS UK construction purchasing managers’ index was 49.7 in March, indicating that the industry is already contracting. But the need for more housing remains critical. Considering that an Englishman’s home is his castle, it is perhaps rather strange that we are not a nation of self-builders. In fact, only around 5 per cent of the new homes built in Britain each year are self or custom built. Put that into context in Europe and the US where the proportion is closer to 40 per cent and it seems even stranger. There have been many reasons for this – the limited availability of plots in the right locations has been a big challenge, the cost of extending infrastructure another, but flexible mortgage finance has also been limited. This is a travesty, particularly because the quality of self-built homes is nearly always far higher than the new build boxes churned out by the biggest developers. Recent headlines attest to that. There are several major advantages of self-build – both for the homeowner and the lender. One of the biggest barriers to movement in the housing market is stamp duty. Tales of older homeowners unable (or unwilling) to downsize due to an enormous stamp duty bill pepper the personal finance pages week in, week out. Self-build can alleviate this burden, as stamp duty is payable only on the purchase price of the plot of land, significantly cutting upfront costs for those already on the housing ladder and thinking of moving. Under £125,000, land purchases are stamp duty-free. VAT www.mortgageintroducer.com

Stuart Miller customer director, Newcastle Building Society

is also recoverable on much of the build costs and materials, making self-build even more cost-effective. When house prices remain so high in many parts of the country, selfbuild looks increasingly attractive. While most new build suffers from the new build premium, depreciating a property the instant ownership changes hands from developer to buyer, self-build typically adds value post-completion. The capital outlay of purchasing land and financing the building work usually equates to around 80 per cent of the gross development value – immediately netting homeowners around a 20 per cent profit, providing they stick to budget. According to the Homebuilding & Renovating Self & Custom Build Market Report 2017, the average spend on a selfbuilt home was just £270,000 while the Gross Development Value was £500,000. This not only has obvious attractions for the borrower, but it benefits the lender too by building in a larger equity cushion to the deal. The demand for self-build is sub-

MAY 2019

stantial. Official figures show 40,000 people have registered an interest in self-build plots in England alone. This is likely to be lower than the true number of people who would build their own home given the opportunity – according to the National Custom and Self-Build Association, councils are not all equal when it comes to supporting self-build. In spite of a legal requirement put on councils to keep a register of those interested, a freedom of information request put by the association found that 16 per cent of England’s councils were failing to comply. Others allowed interested parties to register for free, while several charged anything from £15 to £600 to register. Clearly these inconsistencies are likely to skew the figures. There is also strong support for custom and self-build north of the border where the Scottish government has made £4 milllion available to fund loans to those unable to find traditional bank finance. This is where a big challenge for self-builders has lain: too few lenders are committed to this sector. Building societies have dominated the market, and continue to do so. Happily for borrowers and brokers, things are getting slightly more competitive and rates have fallen – as with all mortgage rates – and many lenders are increasingly flexible on loan-to-income ratios. As with any application, presenting the case in its best possible light is key to getting an approval. In the case of self-build, this becomes rather more complex as lenders will want to see comprehensive evidence that the project is properly planned and insured. This includes a site map showing where the property will be built, floorplans, a detailed budget and valid planning permissions. Challenges aside however, the self-build and custom-build route to homeownership offers many advantages for borrowers. For brokers, it is a market that remains underserved and in need of their support and expertise. For us, it remains a key market where our growing expertise and experience can make all the difference to fulfilling those borrowers’ dreams. MORTGAGE INTRODUCER

Review: Buy-to-let

Has buy-to-let changed for the better?

Bust follows boom

In 2015 the government identified what it viewed as a potential problem. Rising house prices and constrained affordability had made it much harder for first-time buyers to get on the property ladder. Labour was garnering support from increasingly disillusioned younger voters; the-then Chancellor chose to act. The first change was to impose a 3% surcharge on buy-to-let purchases; the removal of tax relief on mortgage interest followed. The fallout from these fiscal changes has been considerable. At the same time, the Bank of England was worried that a big sell-off of buy-to-lets could flood the market and put downward pressure on house prices; that, combined with the tougher income tax www.mortgageintroducer.com

Alan Cleary managing director, Precise Mortgages

rules prompted a tougher affordability stress test on new buy-to-let mortgages and remortgages. Then followed the portfolio rules for landlords with four or more mortgaged properties. Government regulation forcing HMO licensing, fire regulation, energy performance standards and a crackdown on letting agent fees have also been introduced in the past 24 months. Ironically, the combination of these moves prompted a mass re-evaluation of the profitability of buy-to-let and a mass sell-off of properties by landlords who could either not afford or no longer be bothered with the hassle of running rental property. House prices, particularly in London and the South East where yields have always been lower, have indeed fallen. First-time buyers have undoubtedly benefited.

Is buy-to-let better?

It’s certainly very different today from five years ago. But so are a lot of things. The key to remember when questioning the health of the buyto-let sector is whether there remain opportunities for landlords to make a profit. The answer to that is yes. Perhaps the most striking change in the market has been the exit of amateur landlords, playing at property but not fully engaging with buyto-let as a business and investment strategy. The fiscal and regulatory

changes that have occurred have been too onerous for anyone not committed to treating buy-to-let as a means of making money; they have probably quite rightly sold up. Those who remain are the professionals. We have seen a big uptick in the number of landlords buying through limited companies, particularly where they own a portfolio of properties. Companies come with a different handful of tax considerations and costs, and they won’t be right for all landlords but this trend does show that the sector is becoming dominated by professionals running businesses. I won’t suggest that this makes the market better, but I do think it is better for the market to be dominated by individuals and companies that have their fingers on exactly what is needed from them to remain profitable. It’s better for those individuals who have left to put their money in other, perhaps more liquid, assets that require less active management. It’s better for tenants to live in properties that are managed by landlords committed to providing high quality rental accommodation where maintenance is carried out promptly and competently. And it’s better for lenders and brokers to be dealing with professionals who understand and can afford the commercial dynamics of what they’re getting into.

Figure 1.1: Trends in tenure, 1918 to 2013-14

Source: Ministry of Housing

100 90

social renters

private renters

percentage

There’s a rule of thumb that applies to writing headlines: Don’t ask a question, the answer will inevitably be no. I’m breaking that rule because this is a question that gets asked a lot in the market, by brokers, lenders, politicians, regulators and indeed journalists. And it’s one worth considering. Before coming to any conclusions, I think it’s worth pointing out a few facts about the market and how it has changed over the past three or four years, as well as the past 15 to 20. Since 2006-07, the overall number of owner occupiers has dropped, driven largely by a decline in the number of homes bought with a mortgage following the financial crisis. This coincided with a sharp rise in the number of homes available to rent privately. This followed broad deregulation of the sector in the late 1980s when rent controls were abolished, assured shorthold tenancies became standard and lenders began to be more interested in lending to private landlords. It stimulated a boom in buy-to-let from the early 2000s which saw the private rented sector nearly double in size by 201314. The latest government figures show 19% of households are now living in the private rented sector.

owner occupiers

60 50 40 30 20 10 0

1918

1939

1953

1961

1971

1981

1991

2001

2013-14

Base: all households Note: underlying data are presented in Annex Table 1 Sources: 1918: Estimates by Alan Holmans of Cambridge Department ofINTRODUCER Land Economy MAY 2019University MORTGAGE 1939 to 1971: "Housing Policy in Britain", Alan Holmans, Table V1. 1981, 1991: ONS Labour Force Survey; 2013-14: English Housing Survey, full household sample

Review: Buy-to-let

Unfair evictions law is banning fixed-term contracts There’s no doubting that over the past half a decade or so, we’ve seen an increase in the politicisation of the private rental sector, landlords’ place in it, and that of ‘Generation Rent’. You do not need to be a psephologist to work out why that might be. A cursory glance (and understanding) of recent election results, who tends to vote for which parties, and who might need to do more to secure the support of private rental tenants, will tell you all you need to know. Boil it down to the basics and it reads something like this – younger people are more likely to rent, younger people tend to vote for the Labour party, and the Conservatives are unlikely to make any great strides unless they can convince some of that younger, renting demographic to move across to support them. However, it’s a little more farreaching (and therefore important) politically than just this. For a start, you have the growth in the number of renters that has taken place over the last ten years. Last year, Shelter published some research into this ‘phenomenon’ and, when you review this data, it’s not surprising why this Conservative Government (even in a minority form) is putting such focus and resource into changing the sector and attempting to portray itself as fully behind ‘Generation Rent’. So, for example:  4.7 million households now rent privately in England, which is a rise of 74% over the past decade.  The number of families with children who now rent has gone up by 86% in the same time period.  In the six years between 2011 and 2017, private rents increased 60% faster than average wages.

Bob Young chief executive, Fleet Mortgages

The Shelter research – which was actually conducted on its behalf by Number Crunch Politics – looked specifically at the political persuasion of private renters in marginal

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seats. That is, those seats that the Conservative Party would need to win at a General Election were they to try and turn their minority into a majority. Even with half a decade of intervention into the private rental sector in an attempt to become the party of ‘Generation Rent’ the feedback from the research was not particularly heartening to the Conservative cause. For a start, those private renters in those marginal seats were still less likely to vote Conservative; indeed (at the end of last year) they were some 22 points behind Labour. Understandably, however, those private renters do want the Government to prioritise housing issues, but it seems like it’s not around tinkering with the private rental sector where they want to see action, but in terms of building more social homes, and continuing to support schemes like Help to Buy and shared ownership. In other words, it wants a Government that will help ease their transition from private rental tenant to home owner. But, where the Government might be on the right track is in terms of upping the quality of homes within the private rental sector, as those marginal voters tended to think that the state of housing had got worse in the last decade. Indeed, this issue was the second most important to them, only just behind crime levels and ahead of healthcare, immigration and education. So, while it’s obvious to all that housing is an incredibly important issue, particularly to those who are private rental tenants, one can’t help wondering whether the Government has been on the right track in terms of its measures which impact so hard on landlords – who after all are providing the homes that millions upon millions of people live in. Indeed, when you look at the burgeoning number of tenants, including many, many families, you have

to wonder about policies which look designed to remove large numbers of landlords from the sector. The latest foray into this market – the banning of ‘unfair evictions’, which were already not allowed – in effect is actually banning fixed-term rental contracts where both parties agree a term, and the default position is that the tenant will leave at the end of that. With this new law, tenants will always be able to continue to stay in a property, therefore landlords who only want to rent out a property for a set amount of time, simply won’t be able to do this. Hence, there’s likely to be a drop in this type of property which again doesn’t help the overall private rental sector and is likely to mean that ongoing demand is met by rising rents. Is this understood at the very highest levels of Government? Perhaps not. Politically at least, many still believe there is plenty of political capital to be gained from playing out this landlord versus tenant ‘battle’. Whether this is enough to gain the voters the Conservative Party craves remains to be seen, but one can’t help wondering whether there is sustained damage being done to the private rental sector while it tries to secure a majority? www.mortgageintroducer.com

Review: Buy-to-let

Niche opportunities in buy-to-let Landlords are not a homogenous group of people and their investment property choices and portfolios are diverse. We get a wide range of enquiries and there are many niche areas of buy-to-let lending that are of interest to our clients.

Holiday let investments

Holiday lets have become a popular choice for landlord clients in recent years. A rising increase in Brits holidaying at home in the UK has generated the rental demand and increased mortgage options are now available for those looking for a unique investment opportunity. Sourcing holiday let mortgages is slightly different from regular buyto-let and there are certain points to check with your clients at the outset  Parks and covenants – some holiday let properties have restrictions on how they can be used and let too which may affect the number of lenders to choose from.  Location – most lenders will expect the property to be in a prime holiday destination for example Cornwall, Devon and Brighton.  Rental coverage – some lenders will need a local Holiday Letting Agent letter to confirm anticipated rent in low, medium and high season. An average of these will then be used in the calculation.  AirBnB – We work with a number of lenders that offer finance on holiday let advertised and run as a AirBnB. Further location restrictions may apply to these properties and those using elements of ‘serviced accomodation’, which is common amongst AirBnBs, should also be checked with the potential lender. This is an area of buy-to-let finance that seems to be gaining interest, with several specialist lenders recently extending their propositions to include options for holiday lets.

Jane Simpson managing director, TBMC

There is a good selection of lenders offering lending on ex-council houses without too many caveats, however most lenders on our panel are more prescriptive when it comes to ex-council flats. Specific lending criteria for excouncil flats includes limitations on the maximum number of storeys in a block of flats e.g. Barclays has a maximum of seven, Shawbrook has a maximum of 10 and Aldermore will only accept up to four. Certain lenders will offer lower loan-to-value products for ex-council flats and others require that the block has a certain percentage of private owner-occupiers e.g. both State Bank of India and Landbay require 50% to be privately owned. Some lenders prefer not to lend on flats with deck access and other lenders may impose more restric-

“These cases can be quite straightforward to place if you apply the right knowledge of lending criteria” tive minimum property values for ex-council properties, such as Kensington with a minimum value of £200,000. Although sourcing mortgages for niche buy-to-let requirements can be quite specialised with more limited options, these cases can be quite straightforward to place if you apply the right knowledge of lending criteria and the determination to pursue a solution for your buy-to-let clients.

“A rising increase in Brits holidaying at home in the UK has generated the rental demand and increased mortgage options are now available for those looking for a unique investment opportunity”

Ex-council properties

We frequently get enquiries about ex-council properties at TBMC, which can be an attractive investment proposal for some landlords. www.mortgageintroducer.com

MAY 2019

MORTGAGE INTRODUCER

Review: Buy-to-let

Competition in the buy-to-let sector good for everyone

Portfolios coming under greater scrutiny

Let’s begin by welcoming Fleet Mortgages back into the buy-to-let arena after a three-month hiatus. The lender returns after securing a long-term funding deal which should see Fleet complete over £1bn in new lending. Fleet is offering new products across its three core areas – standard, limited company, and HMO/multi-unit blocks (MUB), and has also introduced a number of enhancements following feedback from its intermediary partners. This brief absence underlines just how challenging current conditions are for lenders of all types, across all sectors. During lingering economic uncertainty, it’s difficult to predict how funding lines will react. So, it was reassuring to hear Fleet chief executive Bob Young comment that whilst admitting that he would have liked to have seen the lender return

Activity within the specialist lending community might be heating up but, as noted in the recent Paragon PRS Trends Report for Q1, landlords have scaled back their buying intentions, reduced their reliance on mortgage debt and improved affordability by spending less. The proportion of landlords looking to purchase property was suggested to have fallen from between 15-20 per cent (before the announcement of tax and regulatory changes in 2015) to a current figure of 7-10%. Average portfolio gearing – which measures the proportion of debt finance relative to a portfolio’s overall value – has fallen from 40% in 2014 to a current level of 33%, with landlords who have three or more properties borrowing 36% of their portfolio value on average. Meanwhile mortgage costs as a proportion of rental income are down from 30% at the beginning of 2017 to 27%. A factor which is reported to be aided by landlords remortgaging onto lower interest rate and longer-term fixed mortgage deals. It’s inevitable that landlords are having to reassess their professional and personal goals when it comes to buy-to-let portfolios, large or small. As suggested in the PRS Trends Report, while landlords with an average of 12.8 properties and over 20 years’ experience in the private rented sector will remain engaged in the sector, they may now be prioritising measures to bolster financial strength over portfolio expansion. Many will now be poring over their tax bills and looking for ways to become more tax efficient and it will be interesting to see how this might impact their plans over the short, medium and longer terms. Such moves should take nothing away from the importance attached to the buy-to-let sector. However, they do serve as a timely reminder of just how essential it is for advisers to get to grips with the wider financial needs of their buy-to-let clients.

Ying Tan founder and chief executive, Dynamo

to the market sooner, “what this process has shown is that there are a growing number of funders who value the quality of the Fleet Mortgages’ proposition and want to work with us over the long-term.” This sentiment bodes well for other specialist lenders as it highlights the available appetite from funders when it comes to servicing the financial needs for the right type of proposition. And the more competition – aligned with greater product choice – we have in the buy-to-let sector the better.

“Fleet is offering new products across its three core areas – standard, limited company, and HMO/multi-unit blocks (MUB)”

The importance of specialist lenders Following this boost to the more specialist end of the sector, data from MT Finance outlined just how important these types of lenders are for property investors, especially in the current regulatory climate. The Q1 Property Investor Survey from MT Finance showed that almost half (42%) of property investors said they had struggled to secure a mainstream buy-to-let mortgage in the last 12 months, with 54% citing affordability criteria as the primary barrier to such funding. This was followed by age restrictions at 32% and insufficient deposit capital at 14%. Yet, 46% of those unable to obtain a buy-to-let mortgage filled the funding gap with other sources of liquidity. 50% of those opted for bridging loans, 34% refinanced through a specialist buy-tolet lender, and 16 per cent opted for a secured loan. As a result, 58% of the 125 property investors surveyed did not think buy-tolet lenders are doing enough to support them. When asked what more main-

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stream buy-to-let lenders could be doing, 36% said applying a manual underwriting process for professional landlords would better support them, followed by increasing LTV thresholds at 32% and relaxing age restrictions at 26%. Whilst we shouldn’t underestimate the value attached to many mainstream lending options within the buy-to-let sector, as highlighted in the survey, many are struggling to meet the changing needs of a range of landlords in light of stricter affordability measures, tougher stress testing and changes to tax relief which are resulting in many portfolio landlords switching to a limited company structure. The data also highlights the importance attached to the advice process. Primarily how options are available beyond the high street, with specialist lenders generating innovative, competitive product ranges with sensible criteria to meet demands from the more professional landlord. And the intermediary market continuing to be a vital conduit for this type of business.

www.mortgageintroducer.com

Review: Protection

Market growth and opportunities The protection market continued to grow in 2018 according to Gen Re’s Protection Pulse report, but Drewberry’s head of protection advice Rob Harvey is disappointed that the IFA channel saw the lowest growth. The annual analysis of the industry showed total new business volumes increased by 5.6% year on year when measured by premium and by 8.6% in terms of the number of new policies written. Annualized premium exceeded £700m for the first time since the reinsurer launched the report in 2013.

Kevin Carr chief executive, Protection Review and managing director of Carr Consulting & Communications

Growth

Term assurance increased by 7.5% to £315m, income protection grew by 4% to £48.8m and accelerated/ standalone critical illness insurance rose by 2.4% to £273m. While the independent advice channel grew by 4.7% to £425m, it saw a lower growth rate than the restricted advice channel which increased by 5.3% to £182m, and the non-advised channel which rose by 10% to £117m. “It’s great to see growth in the protection market, especially in the

area of income protection, which has grown at a faster clip than critical illness insurance over the past year (albeit from a much smaller base). Income protection still has a long way to go to catch up with critical illness insurance in terms of the value of sales, but its faster growth rate in 2018 is a promising starting point,” says Harvey.

Advice

“It’s also interesting to see a breakdown in growth by sales channel. Yet here the news is slightly more disappointing, with independent advice seeing the lowest growth rate. At Drewberry we offer full, whole-of-market advice to all of our clients and believe this is the best route to secure a good protection deal for each and every individual who seeks out our support in this area. “Non-advised sales outpaced both sales from restricted and independent services, another concern given the complexities of products such as income protection, where we truly believe the help of an adviser is the best option for clients looking to protect themselves in this manner.”

Consumer confusion A survey by Legal & General revealed that consumers are confused by the complicated language used by the protection industry. In fact, only 9% of the 2,000 people surveyed associated the term ‘protection’ with life or critical illness cover, with 40% thinking it related to protection against physical harm or protective clothing. A further 19% didn’t associate the word with anything specific at all. The insurer has called on the industry to simplify the language used around life insurance and critical illness cover to help intermediaries have better conversations with customers. Craig Brown, director at Legal & General Intermediary, says: “As a sector, it is our responsibility to provide intermediaries

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MAY 2019

with all the tools, products and information they need to empower them to help customers.” And CIExpert Director Alan Lakey concurs. “I fully agree with the call to cut out the confusing terminology,” he says. “As an industry we need to use simple language that people understand, for example instead of income protection we should say ‘sick pay’ - everybody understands this term. “Critical Illness is also a misnomer as many of the conditions are far from critical, and life insurance is really ‘death insurance’. “Although these are unpalatable terms, they are precise, simple and easily understood by consumers.”

News in brief • Royal London has introduced a new five-year payment period to its income protection range, promising increased flexibility and more comprehensive cover. • St James’s Place Wealth Management and Essential Insurance are the latest firms to join the Protection Distribution Group. • Research from Scottish Widows found that more than four million consumers are put off financial planning due to ‘decision fatigue’. • Portico has launched Portico Finance, an advice service designed to help clients find protection, mortgage and buy-tolet deals. • LV= paid out 94% of individual protection claims across life, critical illness, terminal illness, income protection and unemployment policies during 2018, totalling £97.9m - up £10m from 2017. • Sesame Network has launched a technology-focused conveyancing solution in partnership with Aventria, which aims to help streamline the advice process for its mortgage and protection members. • Aegon will now only require customers to complete a questionnaire for cover worth more than £2m for life and £850,000 critical illness for family protection, mortgage and business cover. • Adviser firms that have used technology to deliver efficiencies have increased their repeat business by a third, according to research by Intelliflo. • Scottish Widows has signed up to the Protection Distributors Group Claims Charter. The insurer assigns a dedicated claims handler for each case, provides regular client updates and ensures payment of a claim within 72 hours of it being approved.

www.mortgageintroducer.com

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Review: Protection

Finding the protection ‘blind spots’ I like cars. My boss loves cars, so it is not uncommon for me to find emails with links to Goodwood dates, local car meetings or the occasional magazine article sitting in my inbox. These kind gestures are generally well received, however, when a copy of Mascot: the magazine of the Midget and Sprite landed on my desk last week, I was concerned… Nevertheless, I persevered and found that this particular edition was less to do with Midgets and Sprites and more a detailed and scientific explanation of how car manufacturers are using technology to make things invisible. I read on to discover how Toyota is trying to “develop a cloaking device designed to turn vehicles’ A pillars, to the left and right of the car’s dashboard, invisible, improving road visibility for the driver”.

Alisa Wallington Senior Product Manager, iPipeline

Pesky pillars

I can relate to this. I have fallen foul of those pesky A Pillars before. Approach a roundabout, quick look to the right, no cars, proceed… then slam the brakes on at the last minute as you find yourself looking into the angry face of a man in a BMW gesticulating at you, AKA – the blind spot. This got me thinking. Where are the blind spots when it comes to protection? We are trying to grow the market. We need to fuel more conversations and get more clients covered. So how do we make protection more visible? Like in a car, a blind spot is often something of which we are unaware. I did some Googling and came across the following definition: “something you systematically overlook either intentionally, but more than likely, subconsciously”. Protection is often overlooked. Whether intentionally or subconsciously depends on the perspective. For example, a mortgage broker might intentionally overlook protection due to a lack of time, resource or knowledge. A consumer is more likely to subconsciously overlook it

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MAY 2019

because they are unaware of what it is and why they need it. We need to ensure the right conversations are happening with the right information at the right time and this is where technology and data can help support the adviser. The conversation can be initiated early by providing upfront costs with minimal data inputs, and displaying personalised and therefore relevant data can help engage the consumer and allow them to understand the risks. The good news is iPipeline’s data tells us that mortgage brokers are already selling more protection than ever, with a significant rise in the number of multi-benefit plans being sold. Whilst this is encouraging, I can’t help but think of opportunity cost as being a potential blind spot. The mortgage advice process is often viewed as a one-off event, focused primarily on helping a client purchase a property. Whether protection is discussed or not, further engagement is either unlikely or minimal. In my opinion, a trick is definitely being missed here. Circumstance and needs change over time. Life events such as buying a home, marriage, kids, more kids, divorce…all prompt us to pause, reset and consider what is important. It is the job of the adviser to help clients understand what this is and how they can protect it. But how can they continue to manage this if they are unaware of it? In the absence of an ongoing relationship, further opportunity is lost.

Whether the opportunity is lost completely or lost to an aggregator, we could be doing more to ensure it doesn’t happen, or more realistically, that it happens less. In a world seemingly obsessed with the behaviour of the ‘millennial’ and the ever-increasing push for direct-to-consumer, how can we ensure that the value of advice is not overlooked? The ability to trust, appreciate and become loyal to someone is something which evolves over time. But it also requires consistency and commitment.

Making contact

The rapid growth in product transfers creates the perfect foundation for advisers to build on existing client relationships. Making contact at renewal will not only make a client feel considered and therefore more likely to engage, it opens further revenue opportunity for the adviser by ensuring that the client’s full protection needs are reviewed at the same time. For us to tackle blind spots and improve visibility, we must first recognise their existence. Opportunity cost is just an example of where we could improve and create value for both adviser and consumer, whilst at the same time growing the protection market. Improving the overall visibility of protection is the responsibility of many. Advisers need to focus on creating better relationships with clients so that changes in circumstance are recognised through lifetime engagement. Providers need to create products that can flex and adapt to these changes, and technology providers must continue to make it simple and quick for an adviser to appropriately compare products and identify the right solution for the client. www.mortgageintroducer.com

Review: Protection

The name of the game Within our industry we are generally agreed that calling our range of products “protection insurance” is right. Outside of our bubble, even remaining in the slightly larger bubble of financial services, we’re called the “Life Insurance” sector, but we all recognise that this is misleading, since we offer much more than just Life cover and in fact Life is often the least important cover a customer can take. So, protection it is. Unfortunately, this term has virtually no resonance with the consumer. I remember a presentation from an external marketing firm several years ago, which mocked our use of the word “protection”, which they only heard about (in this context) when they were asked to speak at one of our industry conferences. They had a slide which showed all the things they associated with the term: hard hats, barbed wire, condoms…

Phil Jeynes head of sales and marketing, UnderwriteMe

So it’s no surprise that a recent Legal and General survey found that only 9% of respondents recognised that “protection” refers to Life, Critical Illness, and Income Protection cover. It’s possible that trying to improve this percentage is futile, given the entrenchment of “Life” as a catch-all term and given the wider, much lamented problem of raising awareness of the need for cover in general, irrespective of its correct nomenclature. We all know, I expect, that Biro is a brand name and there is a correct term for the generic product. Yet if I was to come to your office and ask to borrow a ball point pen I’d sound ridiculously formal. Ditto if I was to ask to use your vacuum cleaner. It’s a hoover, regardless of whether it’s actually a Vax. For the record, I’m not offering to hoover your office. Frankly it’s irrelevant what our customers call the product as long

as they buy the necessary amount. Friends of mine regularly ask me to have a look at their Life Insurance policies to help them understand what they’ve got. Often they’ll say something like “I think my life insurance covers critical illnesses” or “I’m pretty sure my life insurance starts paying out after six months”. To experts like us these assertions immediately identify that perhaps the product isn’t Life cover at all; much like when I start any conversation with a tradesperson and they immediately adopt the weary look of someone who is going to have to draw me a sketch to get me to understand the job in hand. But similarly it doesn’t matter if I never understand what a soldier course is, where my water supply enters, or whether my drains are shared (and I really don’t) as long as I recognise my experts’ recommendations and the end goal of the plan.

Improving our healthy protection habits Last year our Rewire Routines campaign had great success in creating healthy habits, by helping more advisers to have regular protection and general insurance conversations with their customers. This year we want to move our campaign on a step further, and one of the ways we are doing this is by placing a greater emphasis on the importance of protecting people’s income. A good example of how advisers can turn good intentions into healthy habits is when they’re completing the budget planner early in the mortgage process, by asking the customer how they or their family would maintain those outgoings if they were unable to work, or unfortunately die? Conversations about affordability and stresstesting the mortgage – to see if the customer could still afford it if it was more expensive – are also good opportunities to have the protection www.mortgageintroducer.com

conversation. It’s about creating the habit throughout the mortgage advice process to pose a couple of open questions about what financial provision the customer has and how they would manage? Importantly, you don’t have to talk about products – you’re simply making sure the customer is fully aware of the risk that should they not have their current income for one reason or another, they’re comfortable they could still afford it. This also avoids the need for any tricky industry jargon, because it’s about having a normal twoway conversation that people can relate to. What would the outcome be if you couldn’t work long-term or if you unfortunately died? How would your family cope? And would you like to do something about it to mitigate the risks and provide peace of mind? Furthermore, is protecting income more important than repaying the debt, because if you can

Jeff Woods campaigns and propositions director, Sesame Bankhall Group

MAY 2019

no longer afford to live in the home then what’s the point? Whereas if the customer’s income is maintained through some form of protection, then even if they’ve still got the debt at least they can maintain their standard of living. Ideally you would clear the debt as well, but just getting rid of the debt alone doesn’t necessarily provide the solution. And don’t forget that mortgage brokers without the necessary product permissions can still have these same customer conversations; they just need to make sure they have a business relationship in place with a specialist firm who they can refer the customer on to. It all boils down to having a normal and natural conversation with customers about the risks when taking on mortgage debt, and how these risks can be mitigated, by working through a series of scenarios that pose the simple question: “What happens if…?” MORTGAGE INTRODUCER

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Review: Protection

Product transfer fees can offer protection benefits We saw in 2017 a double- digit growth in protection sales for the first time in some considerable period and while there is no definitive guide to 2018 numbers as yet, anecdotal evidence suggests that it is likely to have been a good year too. Interestingly though it appears, at least from the evidence being published by the two main protection technology suppliers to the industry, namely iPipeline and Iress that the beginning of 2019 has seen some further considerable growth especially in the mortgage protection product area. We are acutely aware in the Industry that the Mortgage Market Review (MMR) has had some considerable effect on the time taken to both research and complete a mortgage for customers. Logic suggests therefore that given the upturn in the intermediary share of the mortgage market that brokers have a quandary to consider. Do they research and recommend life assurance and GI on each occasion or do they bow to the undoubted customer pressures to make sure offer letters arrive in time for each and every house transaction as, let’s face it, that is what happens? Some, of course, will try to do both even given the additional time pressures. The advent of product transfer (PT) fees paid to brokers has added an extra twist. While in some instances the time taken to research and complete a PT may be slightly less than a normal mortgage, nonetheless it is time-consuming. Add to that the fact that some lenders pay a reduced proc fee for PTs and the dilemma is heightened as a similar amount of time and effort can bring up to a one-third dip in the fee paid. If this is replicated across a number of mortgage transactions per broker per month, that could lead to a significant drop in income for some firms. At the same time we are seeing firms suffer inwww.mortgageintroducer.com

Mike Allison head of protection, Paradigm Mortgage Services

creases in costs from PI to fees so something has to give. Step forward the protection opportunity. Given the investment in systems by most of the main protection providers in the past five years the time it takes to complete a protection case has dropped significantly. Processes are slicker given the odd glitch will always happen and business flows can be better controlled by pricing movements quicker than ever. Most of the key insurers will boast straight-through processing rates of 80%-plus and some like Canada Life, for instance, have taken the decision to stop asking for medical reports from doctors at all – a once guaranteed source of frustration for many a broker chasing doctor’s surgeries to see if reports had been completed. So with the reduction in the time taken to get a protection case to offer, a healthy and competitive price offering to consumers in most cases where distributors choose not to adopt loaded premium rates, and a reward structure in commission terms that pays fairly, it could well be a reason why we have seen an upturn in sales in the early part of this year.

MAY 2019

Also, we cannot overlook the advances in software technology available to brokers to see why this apparent growth has occurred. Not only does the highly acclaimed Solution Builder software help the sales process deliver a better than ever match of products to customer need, their heavy investment in back-office software has heightened the process even further by eliminating the need to re-key data and by using it to its maximum effect. That data can be ‘pushed’ in to the provider’s underwriting systems to complete transactions in a way not thought possible only recently. Paradigm’s own experience in this area has seen significant growth and our offer to our Protect members to cover the cost of the software has helped to see a measured growth in protection sales. General insurance linkage into the same system is having positive effects on that market too and although a limited number of overall distributors are taking the opportunity to link to the software at present this will undoubtedly grow further in the future. The market as a whole is to be applauded for pulling together to create an environment where all clients can be protected in an efficient manner and hard-working brokers can benefit in a ‘swings and roundabout’ way from the increase in PTs in the intermediary mortgage world.

MORTGAGE INTRODUCER

Review: Protection

Making the right decision There are two ways to consider the notion that many of us don’t have the mental space to make the right choices when it comes to tackling difficult decisions, as Scottish Widows says. One is that it’s a bit depressing. The other is that it’s an opportunity to do what we do – be we mortgage brokers or protection intermediaries – and that’s give advice. It’s not that straightforward of course. Clients can make decisions as we all know just not always about the things we want them to. Some 52% of Brits apparently always ensure they are making the best possible choice when picking a holiday destination while just 29% say that about making changes to their pension arrangements. And according to Scottish Widows, 18% focus on making the best possible choice of dinner on a typical week night. This suggests a risk that these people could be spending too much time ‘sweating the small stuff ’ and therefore reducing the mental energy available for engaging with more important life choices. Getting to the nitty gritty of protection, 51% haven’t made a decision on whether or not to purchase

Steve Ellis head of risk and protection, Premier Choice Group

critical illness cover, 47% have never even thought about making changes to their pension, 38% haven’t decided on whether they’ll buy life insurance or not while 19% say they put off financial admin because it’s too time-consuming and 17% say it’s too stressful. These are perfect comparison exercises. What a client might on a holiday could run into thousands of pounds and you can make a very meaningful presentation of how many tens or hundreds of thousands of pounds could be insured for a relatively small proportion of that holiday fund each month. Even a £10 supermarket dinner for two could get them some very useful life insurance cover – or critical illness. It could make a nice dent in some income protection cover. Clients not making their own decisions is as much about ‘decision fatigue’ according to SW’s research. So it advises when they should make decisions – and when not – it’s all the common sense stuff about eating well, not drinking too well (alcohol anyway!) exercising, making time – you can help clients by ensuring when you visit them or them you – it’s at a time when they are relaxed.

Income Protection flexibility Clients as we know do struggle with the idea of paying for insurance – it can seem a chunk of cash they can ill afford or ill appreciate going out each month. It’s all a question of balance to get them to do something – anything really unless that sounds too desperate.

“Royal London has introduced a five year option for clients” But to use another cliché every little helps. So, for example, rather if the option is to take out income protection for a life time – or a working one – is too daunting or for one or two years seems too little a period to have cover for, Royal London has introduced a five year option for clients. Five years is a little more meaningful unless you have specific reasons other than economy for a one or two year period. It’s a little enough tweak but to repeat… every little helps.

Mortgage freedom day Here’s an odd idea – when is your mortgage freedom day? What is your mortgage freedom day would be a better question? Apparently, it’s the day of the year on which you will have earned enough to pay your mortgage payments for the rest of the year. According to the Halifax it was 16 April – although it depends on where you live and how much you earn. The 16 April date is calculated by taking the average annual mortgage repayment cost of £8729 and the average net annual income of £28,752 Home owners in the North reached their ‘Mortgage Freedom’ day in March, those in the Midlands and East Anglia at the end of April, Southerners around now, that is May at the earliest. To calculate your own – or your clients – you take your monthly mortgage payment and divide it by your take home pay and then times it by 365. The resulting figure is the number of days into the year you will reach your ‘Mortgage Freedom’ day. It’s a nice little exercise – what is achieves in actuality is questionable – what is focuses the

MORTGAGE INTRODUCER

MAY 2019

mind on is of course when one might not have to pay one’s mortgage and how one might budget to make sure one can do it as soon as possible. My feeling is that clients could apply a similar exercise to paying for their insurances - or you could. If you can persuade them that by April say they could have paid their mortgage for the year – the rest of the year is freed up for other expenses. It is likely that any client’s protection expenses – even with the full range of life and/or critical illness, income protection and you could even probably throw in private medical insurance – will not amount to as much as what they have to pay on their mortgage each month. Chances are it will actually only take them a few months into the year to have earned enough to have covered their protection insurance premiums for the year. And if those are covered – whatever might befall them and their ability to earn an income – so will that mortgage, quite possibly in it entirety. When might their protection freedom day be?

www.mortgageintroducer.com

Review: Advice

The pursuit of excellence In today’s society, excellence is applauded in all walks of life. There are award ceremonies for everything you can think of, and the mortgage market is no different. But what is excellence? It is not just about doing the most business and making the most money. Excellence is about putting in maximum effort at all times, not just to get something done, but to achieve the best possible result and to do it with real passion. The starting point of excellence is to decide you want to be excellent. That may sound daft, but if you make a decision that you will not accept anything other than first rate for your customers, for your colleagues and for yourself – it will impact every choice you make. That is right from the big picture stuff, like maintaining standards, right they way through to how you treat the people around you.

John Phillips operations director, Just Mortgages and Spicerhaart

And you can’t do it half-hearted. If you want to achieve excellence, it has to run through everything you do; yours thought and your attitudes which become your words, actions and deeds. Once you have made that decision to strive for excellence, you will find that all areas of your professional life will improve. For example, when helping clients get a great mortgage or remortgage deal, often you are simply creating a solution, but in many cases, you are also creating a dream. Maybe your client is a first-time buyer, you are helping them take that hugely significant first step onto the property ladder. Perhaps you are helping a couple upsize before they start a family, or enabling someone to move to a new area for the job of a lifetime? Whatever the motivations of your clients, if you respect them, then your clients will respect you. And if they respect you, they will

come back to you and give you the best endorsement you can get - word of mouth recommendation. Another important thing to remember on the road to excellence is learning. Don’t be scared to admit you are not quite there yet – none of us is above being coached as to how to do better. So, encourage others to do more or better, and always be open to learning new things. That means respecting the contribution of others and looking at how you can learn from them. Look for areas that can be improved and don’t hesitate in suggesting how to improve them. You also need to have a ‘can do’ attitude and bring a genuine enthusiasm and passion to everything you do. If you can look in the mirror every day and be proud that you always give 100% and strive to do your best, you will be more successful and are much more likely to achieve excellence.

Review: Fraud

Money laundering and mortgages While mortgages are not traditionally viewed as a high-risk service – the concept of borrowing money in order to launder it sounds counterproductive - in reality, the risks associated with the mortgage industry are ever increasing. The latest anti-money laundering regulations warn that mortgaged property as a money laundering vehicle may become more popular as money launders stays to take advantage of what has up until now been an underutilised market for them to tap into. So how do money launderers use borrowing to clean their cash? There are a couple of ways in which this can be done. The first is by using dirty money as a deposit and then taking out a mortgage. The home is then sold and the money cleaned within the larger transaction. Another way is to use dirty www.mortgageintroducer.com

money to overpay a mortgage. By taking out a legitimate mortgage, the money launderer then uses dirty cash to make regular overpayments or a one-off overpayment. The other way money launderers can use borrowing is by securing a buy-to-let mortgage, and then laundering their dirty cash via rental income. Under the regulations, all lenders, brokers and networks need to adopt a risk-based approach to their business relationships. This means they need to have adequate anti-money laundering risk policies and procedures in place. A major part of this is the Know Your Customer procedures – this is because fully understanding customers ultimately enables firms to understand the risk they pose and then to manage these risks effectively.As with all crimes, money launderers are getting cleverer and

John Dobson chief executive, SmartSearch

MAY 2019

cleverer in the ways in which they are cleaning their money, and will use all the technology available to them to deceive lenders and mortgage brokers that their transactions are legitimate. The use of fake ID to pass checks - coupled, with the quick development and ever-changing requirements under new AML legislation means it is getting harder and harder for regulated firms to protect themselves and remain compliant. It is worth noting that all mortgage fraud has been as a result of forged documents, but there has never been a fraudulent case linked to electronic verification. A good electronic AML platform will offer a one-stop-shop where all checks can be done in one place, as well as enhanced due diligence, PEP and Sanction screening and ongoing monitoring. MORTGAGE INTRODUCER

Review: Lending into Retirement

More options available to older borrowers In our daily conversations with brokers there is always one common talking point they raise: “what new, innovative products can we offer our customers?” One area that Saffron has been exploring with interest is ‘Lending into Retirement’. We have now launched a ‘new’ mortgage option for an ‘older’ customer; a mortgage for those who are looking to downsize and pay their mortgage off month by month once retirement is in progress. This product area gives brokers a golden opportunity to help ser-

Anita Arch head of mortgage sales, Saffron Building Society

they leave the workforce and can plan how they wish to live their lives after full time employment1. People live longer than they used to and also longer than they expect. Last year a study showed that people in their 50s and 60s underestimate their chances of reaching 75 years of age. For example, men born in the 1940s were interviewed and only 65% thought they would reach the age of 75. The actual figure achieving this age was 83%. For women, their estimate was indicated that 65% would reach an age of 75

50s and 60s as retirement approaches. Your customers may be over 40 and have seen a property they want to call home, but lenders have already said no. We say, let’s talk further and see what we can do to help. We have also just launched our ‘Lending into Retirement – Downsizing’ mortgage, a standard interest-only mortgage with a difference. As the name suggests, it is available to customers who are hoping to borrow into their retirement. This mortgage stands out, as it allows your clients to downsize and pay off their

You might be thinking it’s odd having a

This material is for professional intermediaries only

vice the lending requirements of an increasing number of older households. Retirement, and our lifestyle in retirement, is changing. In the past, retirement was predetermined. People stopped working in their 60s, and began to live off their pension. This was all very predictable; the period of retirement was defined, and could be short. In 1982, average life expectancy in the UK was 72 — just seven years beyond men’s default retirement age of 65. Now, people can choose when

MORTGAGE INTRODUCER

but the actual figure was 89%. The idea of stopping work at retirement is also changing. In a separate study, two-thirds regard work beyond state pension age as an excellent way of keeping an active mind. Just over three-quarters want to work part-time before retiring completely. The population as a whole are increasingly looking to alter their working patterns as they get older and to continue to earn money in a flexible manner to fit in with their lifestyle. Some people don’t think it’s possible to get a mortgage in their MAY 2019

loan during their retirement. This repayment method and a wide variety of retirement incomes will also be considered. Customers need a minimum equity in their property of £250,000 but we will consider applications below this level when alternative assets are taken into account. We may also be able to accept a lower equity limit, depending on location. What’s important to us is to learn about your clients’ circumstances, and then we can work out what we can do to help. www.mortgageintroducer.com

Review: Equity Release

LPAs should be mandatory for later life advice Sometimes you read something that makes you question whether the human race has any long-term chance of survival. As I write we have just had the Extinction Rebellion demonstrations across the country while the young environmentalist and activist, Greta Thunberg, has been in the UK talking about climate change and the huge problems we are currently storing up for the future.

Stuart Wilson group chief executive, Answers in Retirement

two areas, it’s clear that health, or a lack of it, plays a hugely important part in the equity release/later life market. We often hear of equity release customers referred to as ‘vulnerable’ and that can be the case for a minority, but perhaps we should not just be looking at the vulnerability of clients at the time they present themselves to us, but also consider how this might change in the years ahead

or capability to draw it down? And what happens if there is not Lasting Power of Attorney (LPA) in place so others can make that decision on their behalf? There is a great deal of merit to making the provision of an LPA a mandatory part of the later life advice process, particularly when it comes to equity release customers. While the client might look a picture of health at the point of sale, there are no guarantees about what might happen in the future, and what might actually happen rather quickly. Sorting out the LPA at this point makes absolutely perfect sense and, as mentioned, provides a further layer of protection should the

purple strip running through these pages...

Between 2010 and 2017 over a half a million children in the UK were not given a measles vaccine. You then start to wonder why – when we have a solution to a disease that can lead to incredibly damaging health implications – parents of those children have not taken up the offer not just to protect their children but all those others who have not been immunised. Many will point to a ‘medical paper’ which purported to show a link between the MMR vaccine and autism back in 1998. TTying up the www.mortgageintroducer.com

and what we can do to ensure they are protected in the future. What is the financial services advice equivalent of immunisation when it comes to equity release customers? Well, one of the big areas that is sometimes overlooked, is the ability of the customer to make decisions for themselves in the future? For example, what happens if they lose that ability and yet have an equity release drawdown product? What happens if they need that money but don’t have the faculties MAY 2019

client need it. We truly don’t know what the future might bring. It’s why in our Second Annual Conference in June we’ll be looking at many of these issues – we’ll have former Heavyweight boxer, Frank Bruno, talking about mental health and a number of other speakers covering issues like mental capacity in older people. We want advisers to take this on board and ensure that, when it comes to dealing with the existing and potential future health of their clients, all bases are covered. MORTGAGE INTRODUCER

Review: Equity Release

The high end of the market is full of life It’s indisputable that the equity release sector has changed vastly and positively over the past couple of years, continuing to leave behind common misconceptions and continuing to grow the market in the right way. Recent figures have shown that the number of plan options available on the market has risen from just 73 in 2016 to 233 today. We saw a 62% increase in available plans from Q3 2018 to Q1 2019, from 144 to 233. This growth is giving the consumers the flexibility and

Hattie Tales business development manager, Pure Retirement

anThere are many factors that are contributing to this rise in homeowners in the high-value segment of the market exploring later life lending. For many, their homes were bought at a time when property was significantly cheaper, meaning that as prices have skyrocketed in recent years a disproportionate amount of their wealth has been tied up in their property. A big differentiator between a typical mortgage and a lifetime mortgage is the fact that we do not need

care in later life in favour of homebased avenues then larger and older properties will inevitably require more work than smaller or more modern equivalents when it comes to adapting them to better cater for residents with disabilities or mobility issues. Most high-value properties tend to sit in the midst of expensive areas in general and it’s clear that a number of varied factors are driving the greater interest in later life lending being shown by those in the higher echelons of the housing market.

...but at Kent Reliance for Intermediaries we believe...

options to find a plan to suit almost all scenarios. The market changes and improvements have seen an increased level of interest from all quarters, be it consumers (who in 2018 released record levels of equity from their homes, averaging £11m a day), the government (who as part of their single-point financial advice strategy recommended later life lending as a retirement tool) or influential selfconfessed former sceptics such as Martin Lewis. As the market’s products develop

MORTGAGE INTRODUCER

to do any affordability checks as making payments are an option but are not a requirement. The lenders will assess the properties saleability using a surveyor’s valuation. That said, many will nonetheless have reasons for seeking out later life lending in the first place – especially if they’re planning to remain at their existing property. Improvement projects and general maintenance on larger properties will take up more financial resources than a smaller property and similarly if a homeowner wishes to forego domiciliary MAY 2019

But understanding these demographic changes and the reasoning behind them is meaningless if they’re not in turn acted upon. Sensing this change, we widened the acceptable property criteria on our Sovereign product range when we launched it with the wider remit of opening up equity release to as many people as possible, because irrespective of how it manifests itself, understanding our customers’ needs and effectively reacting to them is paramount if the market is to continue growing at the rate it’s been enjoying recently. www.mortgageintroducer.com

...ODD IS GOOD At Kent Reliance for Intermediaries, weâ&#x20AC;&#x2122;re for broader criteria. Our expert underwriters ensure we have the expertise to deliver more solutions for odd residential cases. Speak to us to see how we could help you place residential cases across the UK, including near-prime, complex income, shared ownership and large loans.

Got a residential case in mind? Call us today on 01634 888260 or visit krďŹ .co.uk This material is for professional intermediaries only

Review: General Insurance

Most insurers won’t cover liability risk by default Thanks to the rise in staycations and the popularity of AirBnB, more homeowners are thinking about how to make their properties generate income.

Holiday hosts

You don’t need much to make it work – just enough for an open-plan living space, a bedroom and bathroom and, crucially, a location that people want to visit. Converting a disused garage or outbuilding, or a space above it, are all ways of creating a holiday let. This all sounds rosy, but the reality is that many of these families won’t have the insurance cover they need and are probably blissfully unaware. Home offices are the same. Over four million people work from home in the UK according to figures from

Geoff Hall chairman, Berkeley Alexander

the ONS, and the numbers are rising. With purpose built insulated garden office buildings becoming more affordable and accessible in terms of planning laws, it’s no wonder that so many homeowners now have a garden office. How many of you and of your clients either work from home or have (or are planning) a home office, holiday let or B&B? At your next client review it is certainly worth asking the question.

Liability risk

It’s not just about the sums insured, the insurer needs to know the situation. If people are likely to come onto the property, whether as employees, clients or paying guests, there is also the added liability risk. Most insurers won’t cover this by default.

Automated GI – a poisoned chalice? We all love how technology can make our lives easier, and there’s no-one who benefits more from that than time strapped busy brokers, but the current moves by some GI providers to reduce question sets and automate all GI polices is a worrying trend. Are these efficiencies aimed at you the brokers, or for the benefit of the insurer? It certainly isn’t for the benefit of the customer, in my view. Some automation in underwriting is a good thing. Using data sources for information that is readily available on public record makes absolute sense. It speeds up the process with less room for human error or fraud; but when it comes to meeting the customer’s needs, how can a broker build a relationship with their customer and understand their lifestyle without asking certain questions? A good broker will know for example that their customer has just got married, moved house, started a family, has a child about to go to university, etc. All of these factors could impact the policy a broker might recommend and

MORTGAGE INTRODUCER

MAY 2019

will feed a broker’s pipeline for future client contact. How would an automated policy know that I built a £50k extension on the back of my 4-bed house? A process that doesn’t ask the customer any questions and just relies on an algorithm to spit out a quote can’t always meet customer needs. Where is the advice – the broker value in this? Many of our brokers tell us customers are uncomfortable with GI quotes that don’t ask them any questions. It doesn’t demonstrate value in the policy or give customers confidence that their risk is adequately covered. Automation doesn’t always mean cheaper either. Generally, the more questions, the more bespoke and accurate the quote will be, resulting in a more appropriate premium. Automation is fine, but for the right reasons and for limited underwriting considerations only. It can never and should never replace the vital role of the broker in the GI sales process.

Size 9 shoe, sir? As widely reported, the FCA has published a report on the general insurance distribution chain and warned GI firms that it “will not hesitate to intervene” if firms fail to meet their obligations to customers. The Mortgage Broker/IFA’s role in this is key. A broker’s value is in the advice that they offer and in sourcing the right products. If you ran a shoe shop you wouldn’t simply sell size 9 shoes just because it made your life easier – clearly one size doesn’t fit all. Not only would most customers feel aggrieved that the shoes aren’t fit for purpose, they’re also unlikely to come back for their next pair. Most brokers will source a mortgage from a range of products, so they can recommend one that fits the individual’s needs, and home insurance is no different. With an advised sale the customer is far more likely to get appropriate, valuable cover at the right price. It’s easy to fall into the trap of thinking that a policy including all the bells and whistles is the best for all your clients, but where does that fit against the FCA’s stated requirement for firms to act in accordance with the best interests of their customers and consider the value of that purchase for the customer? The FCA will be as critical of a firm over-selling on cover that the client would never use as they would be underselling an inadequate policy. Insurers and providers have a responsibility to ensure their products are well designed and underwritten, but equally the broker has a responsibility to ensure they have access to a broad GI product range so they can offer the right products to match the clients’ specific needs.

www.mortgageintroducer.com

CMY

Review: General Insurance

10 practical tips to improve your GI sales The rate of remortgages and product transfers is expected to slow down next year, according to Richard Rowntree, chair of the mortgage product and service board at UK Finance. Speaking at the UK Finance Annual Mortgage Lunch last month, he said: “We do expect remortgaging and product transfers to continue to be strong in 2019 as they were in 2018, especially as previous 2-year and 3-year fixed rate products come to an end. But with a move to over half of all new mortgages going on to 5-year fixed rates, the rate of churn will not continue at the same level into 2020.” This might come as concerning news for advisers, who have benefited from a remortgage boom propping up their business in recent years as property transactions have stalled. With no clear uplift for the housing market in sight, this anticipated cut in remortgage activity puts much greater emphasis on the importance of diversifying income within your business. One such way is by advising your clients on general insurance, including building and contents insurance. By offering professional advice on these products you can help ensure your clients purchase the most suitable policies for their circumstances, which might not necessarily be the case if they were to rely on a price comparison website, for example. It can also provide you and your business with a valuable source of recurring revenue. So, how can you improve your GI sales? Here are our top 10 practical tips:

This means protecting their finances against loss of income, such as being unable to work due to illness or redundancy, or anything happening to their house and contents, such as a flooding for example.

James Watson sales director, Paymentshield

“Be clear about the scope of your advice and the services you offer from the very first appointment” 3. Build your expertise by taking advantage of all the resources around you, including your regional sales managers and telephone business development managers. It’s their job to help you to grow your business, so ask for them for guidance and information. Many providers also provide free tools and resources on their websites to help advisers. 4. Use these tools that are freely available to you to help explain the process to your clients. For example, our Buyers Guide to Home Insurance includes information about the pitfalls of buying insurance online and the limitations of price comparison websites. These tools can help you to demonstrate to your clients that you have invested time and effort in thinking about the home insurance process and care that they achieve the best outcome.

1. Don’t assume that your clients know about everything you do. Be clear about the scope of your advice and the services you offer from the very first appointment. Explain to your client that you will research both their mortgage and their protection requirements as your role is not just to get them into the house, but also help to keep them there.

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2. Remember it’s a requirement of all lenders that there is buildings insurance in place, in fact it’s the only compulsory product in the whole mortgage process. So, make it easy for your client and offer to find the best deal for them. Make it clear that you will be able to liaise with the solicitor to help the mortgage process, including the requirement to have buildings insurance in place, to run smoothly – taking any potential kinks out of the process.

5. Set clear objectives and processes for your business to ensure that GI is MAY 2019

always a consideration. For example, a very simple step to take is to ensure that, on every case, your process is to either advise on GI or refer the case to a GI specialist. 6. Prepare three indicative quotes for three alternative levels of cover in advance for your clients to help facilitate a conversation. Providing examples for budget, standard and premium levels of cover is a great discussion tool and will help your client to understand what they are buying for their money. It helps to demonstrate the value of more expensive cover by articulating the added benefits at the outset. 7. Remember that you won’t win 100% of the time, so don’t be disheartened. Advising on GI is just like any other sales process in that it’s a numbers game. The more clients you talk to about GI, the more quotes you will provide and the more you will sell. 8. Make sure you revisit a conversation about GI once the mortgage offer has been issued. Ask your client whether they would be interested in cutting the cost of their cover, or improving the level of their cover to meet their current circumstances, on both purchase and remortgage business. 9. Make it easy to incorporate GI into your daily routine by integrating it into your CRM system. This may take a little work, but it will pay dividends if it increases your GI sales. 10. Be proactive. Think about marketing campaigns that you can run to your clients to encourage them to think differently about how they purchase GI. Remember to focus on the value of the cover they buy rather than just the cost. Cheap insurance can be an expensive waste of money if it’s not fit for purpose, so place the emphasis on value and appropriate cover. www.mortgageintroducer.com

Review: General Insurance

What being Insurtech really means It’s impossible to ignore the rise of Insurtech. Much has been written and speculated about how it will disrupt insurance delivery, and what policyholders will have to pay for insurance in the future, thanks to its ability to help insurers and brokers streamline their operations and reduce their operating costs. The InsurTech wave doesn’t only stand for technological advance in traditional insurance business, it also brings forth completely new business models. However, in recent months we’ve seen many GI providers repackage their offerings and claim themselves to be Insurtech. But what does being a technology-driven GI provider really mean and what does it mean in terms of the benefits for intermediaries? I’m going to set the record straight here, being Insurtech is about a lot more that having a web front-end or a quick and easy quote and buy solution.

Paul Thompson founder and chief executive, Cavere Intermediary

I recently read an interesting article about the race to be “cool” in the insurance market, and it reaffirmed my belief that despite the hype if you look a little deeper not much has really evolved in the GI space. An insurtech approach means building and owning your own technology, and developing your own systems and products using that technology. A truly technology-driven GI provider will place the use of tech-

nology at the very a core of their business, embracing the latest advances in technology to not only allow intermediaries to access quotes quickly, but truly realise opportunities to improve flexibility, capability and efficiency and embrace the vast potential offered by GI. True Insurtech innovation of course means faster, smoother transactions, streamlined quotations and simplified slick policy administration. But more than this it means embracing the power of data to enable intermediaries to realise the benefits of responsive engagement, faster decision making and improved customer experiences. Insurtech isn’t a buzz word that should be banded around lightly, because in doing so we risk undermining the real advancements that are being made, and the real value that investment in technology can deliver in terms of value to both intermediaries and customers alike.

Measuring up to value In January the FCA launched its GI value measures consultation. The aim of the consultation is to address poor product value and quality, and reduce the risk of unsuitable GI products being bought or sold. The consultation follows on from the FCA’s GI add-ons market study in which it identified poor product value as a key area of harm. With the results of this hitting your desk, now is the time to understand what this all means for you. So what are the value measures? Claims frequency, claims acceptance rate, average claim pay out and claims complaints are the four value measures insurers will be responsible for reporting. Insurers are already required to report on the first three to the FCA, the difference now being that as a result of the consultation this value measures data will be available to customers. In general I am supportive of the measures. I believe brokers should be informing customers about them as it will help them up sell quality, and it will support the view that customers should and will pay more for true peace of mind. However, I urge you to be careful as the value measures in themselves may not offer a true representation of the actual product being offered.Often the thing that drives claims being declined is the placing of inappropriate cover.

www.mortgageintroducer.com

It’s easy to just go with the insurer that pays out on 90% of claims but this could still back fire if the cover sold isn’t fit for purpose. A customer could buy an off the peg building and contents policy and find later down the line that it doesn’t cover accidental damage, or a home insurance package that covers water damage but doesn’t include trace and access. It’s not that the insurer is wrong not to pay out, or that their cover isn’t fit for purpose, it’s that it was not the right cover for that customer in the first place – this is why intermediaries are so important. Talk to your clients and understand exactly what they need, their lifestyle and what matters most to them. Don’t risk their ability to claim. Look for policies that provide the most comprehensive cover at a price they can afford and inform them of exactly what they are covered for, the exclusions, the excesses etc. Your GI provider should be able to assist you with this and providing they have strong relationships with insurers they should be able to access innovative products, bespoke solutions or off-panel underwriting to ensure you get the policy right from the outset. Not only will this provide peace of mind that your clients are covered should they need to claim, but also that their premium won’t go up at renewal.

MAY 2019

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Review: Brexit

Hyperbole is the enemy of stability as well as reason As the ongoing uncertainty of an unresolved (and increasingly contentious) Brexit deal continues to send shockwaves through the corridors of Westminster, so too has the UK property market become a focus for the sheer divergence of opinions within this country, with both ardent leavers and committed remainers seizing on conflicting sources of data to reinforce their views. In-fighting, factionalism and a near-total lack of clarity have continued to stir tensions within the market, yet as property sellers and buyers continue to await the outcome of our current political malaise, pertinent questions remain. Is the property market undergoing a period of decline, for example, or is it maintaining a surprising degree of stability? Is Brexit the dominant driving force behind sluggish transaction levels or are there other factors at play?

David Gilman partner in charge, Blacks Connect

Lowest figures

Figures from the Nationwide have revealed that house prices in England suffered a 0.7% fall in the first three months of this year and a 3.8% decline in London – the first annual decrease in property valuations since 2012 and the lowest figures for the capital in a decade. However, prices in the UK as a whole were reported as having grown, with national averages increasing by 0.7% in March and overall prices rising in every area of the country outside of London and the South East. Regional variations in demand and supply are widely acknowledged as having driven the decline in national house prices over the past few years, with consistent increases in the North of England, as well as Wales, Scotland and Northern Ireland, contrasting sharply with the fortunes of property owners in London and the South East. Some experts ascribe this contrast to the capital’s particular sensitivity to ongoing political uncertainty, while others

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MAY 2019

regard it as a corrective counterbalance to the “astronomic house price growth of five or six years ago” (as Andrew Montlake, the director of Coreco has put it). Nevertheless, it is difficult to avoid the conclusion forwarded by John Goodall (the chief executive of Landbay) that “accelerating growth is being held back by falling house prices in London (and that these are) dragging down the rest of the country”. Moreover, while consumer research continues to point towards the effect of Brexit as the principle reason for current market uncertainties, there is also evidence to suggest that the sector is in much better shape than some would have you believe. Indeed, recent data from the Halifax has revealed that house prices in the UK actually exceeded expectations for the first three months of the year, with the building society reporting a 2.6% increase in annual values. Moreover, a recent forecast by the estate agent, Savills, has predicted that national house prices could rise by as much as 15% over the next five years (based on a projected growth in wages, transactions and interest increases), with the North West of England expected to rise by 21.6% and London (by contrast) by 4.5%. The report has also identified the impact of mortgage regulation (as well as the effect of Brexit) on already high deposit amounts to explain this North-South ‘divide’, while predicting a 12.4% growth rate for ‘higher end’ London properties. However, the Office for Budget Responsibility has recently downgraded its own price growth forecast for 2019 from an optimistic 3.2% to a much more downbeat 0.3%, citing a noticeable weakening in the “leading indicators of housing activity and prices” as the reason for its Uturn. Nevertheless, the independent public body has also maintained its view that “stronger real household income growth and (the) continued

pressure of demand on supply” will eventually lead to house price inflation over the following two years, with the Royal Institute of Chartered Surveyors also suggesting that current shortages “will negate (any) outright falls” in post-Brexit prices and afford a (relative) degree of stability for the future (although it has predicted a “standstill” in national price growth over the current year).

Supply and demand

Which is good news, of course, for existing property owners, but does little to detract from what is a considerable and ongoing problem for the housing industry at the present time, requiring (by the government’s own admission) at least 300,000 new houses per year to keep pace with demand. And although new-build completions in this country were only 3% lower during 2017/18 than for pre-crisis levels and the government has recently pledged an additional £5.5bn towards the Housing Infrastructure Fund, there is still a very long way to go. Moreover, additional factors, such as the impact of widening stamp duty charges on downsizing pensioners or of construction companies looking to balance their books, have also taken their toll on the availability of properties; factors which were present long before the spectre of Brexit became a concern. The point being that when we talk about the current state of the property market, it is inevitable that people will zero-in on the effects of Brexit to explain away the woes that are being experienced. But we often forget to factor in the natural inter-play of market forces and the recurring effect of historic political decisions on the sector. And while there is every indication that Brexit will pose some grave concerns for us all over the coming months, there are also signs of a resilience and fortitude that cannot be ignored. Which means that as Brexit continues to unfold, we will need to maintain our focus and to adopt a more level-headed or balanced approach to future events. Because, hyperbole is the enemy of stability as well as reason. www.mortgageintroducer.com

Review: Stamp Duty

Stamp duty reform would result in more transactions We might be months away from the next Budget – likely to be in October or November at the earliest (unless we have a General Election in between) – but that doesn’t stop the traditional issues that are often raised at such a time being discussed right here and now. Take stamp duty, for instance, that hardy perennial of every single Budget/Autumn/Spring Statement over the past decade or so. There will never be a time it seems when stamp duty and the mechanics behind it are not being discussed, especially given the fact it has been used as a political tool by pretty much every Government since time immemorial. The constant tweaking and massaging of stamp duty is designed to illicit a reaction from the housing market, and (in the short-term at least) it tends to do exactly that. The only ‘small’ problem being that the reaction is not always of a positive variety. However, Governments have tended not to mind too much about the number of transactions being negatively impacted as long as their tax take keeps going up, and for most of the last 20 years or so, that’s certainly been the case.

Commentators

Despite many market commentators suggesting that the Government’s approach to stamp duty would eventually begin to cause serious issues, we’ve not had any real significant change since the 3% extra charge was brought in for those purchasing ‘second properties’. Ostensibly, this was designed to move homes out of the private rental sector back into the hands of owneroccupiers, and to some extent, this might be said to have worked. But, at what cost? Well, undoubtedly we’ve seen the level of purchasing by buy-tolet landlords tail off since the extra charge was introduced, and this has clearly had an impact on the supply www.mortgageintroducer.com

Mark Snape managing director, Broker Conveyancing

of rental properties to the market which has increased rents. This was highlighted as a potential consequence at the time so there’s no way the Government wouldn’t have been aware of it. The re-tiering of stamp duty into different threshold levels has also had an impact, perhaps most notably in the £1-million-plus home space which again (completely understandably) has seen the number of transactions falling since its introduction. Forking out thousands upon thousands of pounds for stamp duty is clearly not appealing for purchasers, especially those who are buying homes valued at over seven figures. And, what about the more ‘positive’ end of the scale? Stamp duty, after all, has been abolished for those first-time buyers purchasing homes under £300k? Has this particular carrot helped more first-timers onto the housing ladder? Well, while there has been an increase, I don’t think anyone would suggest it’s down to the saving of a couple of thousand pounds at best that would have been earmarked for stamp duty. Indeed, there’s some evidence to suggest that this only helps those who were going to buy anyway, rather than provide the ‘bunk up’ that the Government clearly thought it was going to deliver for potential first-timers. And, what does all this change mean in terms of the Government’s tax take? Well, the recent figures from HMRC seem to show that it lost nearly £1bn between April 2018 and March 2019, compared to the year previously. While the number of property transactions in March this year were up, compared to the same month last year, overall we’ve seen subdued transaction numbers and the amount of money stamp duty puts in the Treasury coffers is down. MAY 2019

For all housing market stakeholders this seems like a worrying trend and one that also appears to be entirely self-inflicted. It always seems incredibly odd to me that the Government puts in these measures designed to help people purchase a home for the first time, but which end up being counter-productive by effectively putting barriers in the place of those who already own and might want to move, plus those who might want to continue to invest in property.

Moving house

It’s called the home-moving market for a very good reason, so why can’t we have a series of policies that allow people to move when they want, not just when they absolutely need to. There is already data to show that people are moving less and less after they’ve bought their first home, which is also going to have an impact on stamp duty. Why are we seemingly intent on raising problems and severe financial costs for those who do want to move? The House of Lords Committee on Intergenerational Fairness is the latest body to call for stamp duty reform, arguing the current system has “seriously distorted the housing market” and asking the Government to review its impact on “liquidity…and consider how [it] could be reformed to inform the housing choices and availability for young families”. I’m not so sure it can be reformed to incentivise younger people/families onto the ladder, because there are other, some would say, bigger obstacles for them to overcome, not least saving for a deposit, finding a home, and meeting the affordability measures. But I do think that stamp duty can be reformed to incentivise those further up the ladder who might want to move but see stamp duty as the biggest obstacle, plus of course those landlords who have been hit hard by the increased charges. We must focus on getting transactions up because without this, the market ceases to function properly, and an entire industry (including our own) will suffer as a result. MORTGAGE INTRODUCER

Review: Conveyancing

2009: Ten years after Ten years ago, I and my three fellow founders were mortgage broking. However, having seen too many cases abort for lack of a consistently competent and professional conveyancing service, we founded SortRefer as a standalone business dedicated to offering broker firms access to proven sources of conveyancing support. In those early days, initial quotes were sent out on Excel spreadsheets (how quaint that sounds today!). But it was clear that our aim to introduce brokers to a high quality conveyancing service must make use of the technology which was beginning to have an impact on business – in particular the internet. From 2010, SortRefer developed its first website and the SortRefer service was established. The website and its functionality have gone through a number of incarnations, each more powerful than its predecessor. All of this we ran from a tiny office near Derby until the business outgrew its premises and we now occupy a large purpose built office on the outskirts of Derby city centre. In 2009 and in our subsequent development, SortRefer answered the needs of a new generation of mortgage brokers and we quickly realised that the demand for what we had to offer would become a full-time occupation. SortRefer not only became a pioneer in giving brokers access to good legal representation for their customers, but also by developing the means of accessing that service. We started out on manual spreadsheets, but it quickly became obvious that the only way forward was online. I am proud of the way we have led the way in which brokers can access conveyancers, generate penny accurate quotes and instruct a case - all from their armchair or a client’s house. One of the most significant changes that has taken place in the past ten years is the quantum leap forward of the internet and its associated applications.

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Kevin Tunnicliffe chief executive, SortRefer

MAY 2019

Ten years ago, we had no Instagram – how did we cope? Also, those of you who were at the cutting edge of social media, MySpace was the dominant platform and Blackberry phones and their Messenger facility were the place to be for instant messaging. How times have changed! In 2010, we were still coming to terms with the credit crunch but even though the number of lending sources, particularly among the more specialist lenders, had either withdrawn or reduced their range and appetite. However, life went on. People still wanted to purchase and remortgage property and the need for a simple but more accountable conveyancing option was still as important as it was during the pre 2008 boom years. After the milestone of launching the SortRefer website in 2010, which became the foundation on which so many of the future enhancements we now take for granted were started, we have launched a string of further services for Surveys, Wills, Probate and recently a

conveyancing service for equity release cases. Probably one of our most significant breakthroughs in the past ten years was the delivery of an app, available on all phone/tablet platforms, which enabled introducers to have all the functions of the full website version of providing full quotations, searching for and instructing the right conveyancer, as well as 24/7 communications as well as access to live and past cases. We moved premises in March 2017, which allowed us the space and growth potential to launch an estate agency legal concierge proposition (Agent Butler) and more importantly, launched our own inhouse law firm, Sort Legal. The Sort Group, of which Sort Refer is a major part, now employs upwards of 70 staff. March 2019 saw our best ever business instructions, both for SortRefer and Sort Legal. We saw a 43% increase in conveyancing instructions in the two year period since 2017, and a 22% increase when comparing to March 2018. We’re proud of what we’ve achieved in just a 10 year period, and we’re excited for the projects ahead, where technology and customer service underline everything we’re working on. Technology, like it has for many services, including the mortgage market, forced change on what has been traditionally a very hide bound process. Apart from ours and our peers’ contribution to taking conveyancing services online, The Land Registry also took a significant step towards making the conveyancing process faster for all parties involved. The service, still being rolled out, will allow borrowers to sign their deeds online, without having to arrange for a physical witness to the signing and no longer subject to the UK postal system. Something that would have seemed impossible ten years ago. If I look forward another ten years, there is no doubt that technology will be at the heart of everything we do, as I am sure that the power to develop new applications will continue to grow exponentially. www.mortgageintroducer.com

Review: Conveyancing

We could be on the cusp of meaningful change If there’s one thing guaranteed to stimulate debate in the conveyancing industry, it’s our adoption (or lack of adoption) of technology to improve the home buying and selling process. Indeed, across the entire home-moving value chain, you can find a range of views on the topic, ranging from the evangelical about how their app is the customer experience game changer, to the practically antediluvian: we are already online and have a website - what more do people want? One thing we can all agree on, however, is that the home-moving customer journey is miles off the pace when it comes to the use of technology. In a world where reciting your shopping list aloud in your living room results in it being delivered to your door within 24 hours, the home-moving process remains stubbornly old fashioned, with cases taking three months to complete, on average, and requiring stacks of paperwork.

Highly regulated

This is not for lack of trying, or as a result of a lack of desire, but rather because we operate in such a highly regulated market and are dealing with such vast sums of money that it is crucial we get it right. There is not just the challenge of how we harness technology to improve the conveyancing customer experience - there is also the challenge of working within the law which governs the industry. As much as we face these challenges to the adoption of technology in conveyancing, one factor stands out as the most restrictive; the inescapable reality that some elements of contract law require the physical conveyance of property ownership from one party to another in writing, having been witnessed and signed in person by all parties. House purchase is one of these instances. A good example of the availability www.mortgageintroducer.com

Steve Goodall chief executive, ULS Technology

of appropriate technology only being one of many barriers to adoption can be found in digital signatures. They have been possible since 1999 – two full decades – and yet the mortgage industry is only just now beginning to get to grips with how they can be used to improve customer experiences. Towards the end of last year, the Land Registry provided an update following a year of consultation with the industry on how technology could and should be used. A big discovery for them was hearing that customers are being asked to sign multiple forms in front of a witness, to prove their identity repeatedly, and by different authorities. All of which slows the process down. This won’t come as a shock to anyone who has ever bought or sold a property. Often, it is because of this need to have multiple parties physically present at the same time that the process takes so long and triggers such frustration. The good news is that the Land Registry and Law Commission are now working to develop a way to change this. Over the next 12 months, the Land Registry has committed to exploring both blockchain and distributed ledgers - secure, online databases allowing everyone involved in a transaction to clearly see and track the status of the sale. These two technologies have the potential to open up property transactions and allow those involved to stay up to date, and those who need to act, to be sent notifications with sufficient guidance. This is a welcome step, particularly as private companies – including us – have made considerable investment in tools that fulfil this function. The Land Registry has correctly identified that the first step towards improving the customer journey has to be clearer and simpler communication. They require a secure platform to achieve this comMAY 2019

munication and it makes sense for conveyancers, who already act on behalf of their clients, to be pivotal in its delivery. The Land Registry is also looking at how smart contracts, which automatically complete once everyone involved has filled out their section, and advancing digital signature technology can be used to improve things. This could be a game changer for the other half of the equation - speeding the process up considerably.

Selling land

The other piece of work ongoing on this topic follows last year’s consultation by the Law Commission, which aimed to address legal uncertainty surrounding the electronic execution of documents. This has provided some much-needed recognition of the challenge presented by the practicalities of selling land. European law and UK courts both recognise electronic signatures as valid and as already mentioned, the Land Registry is already moving towards smart contracts, however UK statute law - the Electronic Communications Act 2000 - doesn’t officially allow digital signatures. This needs to change to reflect how technology has moved on. Digital signatures now provide the most advanced security for customers and protect lenders and conveyancers from a compliance perspective as well. According to Adobe, which invented them, a digital signature is built to prevent tampering. It’s created, protected, and surrounded by the highest levels of security — from the time your digital certificate is issued, to the time your signed documents are archived and beyond. Our own DigitalMove will play a substantial role in transforming this information process. By delivering a safe and secure environment for buyers and sellers, we are now seeing customers get immediate access to documentation and complete their initial documentation in as little as 36 minutes. It has been a long time coming, but it looks like we are on the cusp of meaningful change. MORTGAGE INTRODUCER

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Review: Technology

End-to-end application is not the be all and end all Most articles you will read in the mortgage press tend to follow a familiar theme – highlighting an issue or problem, perhaps presenting a solution (if there is one) and then urging advisers to engage with that problem/solution so that any impact felt is not a negative one. Over the years we’ve lost count of the number of articles we’ve read which talk about technology in this vein. How often have you read a piece urging you ‘not to get left behind’ by the seemingly steady march of technology and how it might firstly take your clients away from you and, secondly, how it might end up taking your business away? It can seem like scary stuff and we’re sure there will be business owners/managers out there who have read plenty of these pieces and formulated their business plans for the future based on them and the perceived threat that technology might bring. But when does such a focus on technology work at odds with the real needs of your business and your ability to offer a quality advice service to your clients? At present, it does seem like there is something of a false battle taking place – one in which the industry is obsessing over the delivery of an end-to-end mortgage application process which might not actually be the right war to be waging. What we can say is that there’s currently no shortage of tech firms willing to fight this phoney war and arguing that advisers will be the great casualties. Suggesting to advisory practices that this is the biggest fight of their careers and, to not engage with it, can only result in terrible things unfolding. And yet while there is clearly plenty of money being thrown at this ‘problem’ and, many in the market who believe it to be something of a defining issue, we’re not so sure at all. www.mortgageintroducer.com

Rory Joseph director, JLM Mortgage Services and Sebastian Murphy head of mortgage finance,JLM Mortgage Services

Take, for instance, the major tech player in the retail sector – Amazon. It’s possible to look at its model and see the significant cost savings it delivers to not only the consumer but the business itself (and those who utilise it). But, what are we looking at when it comes to the delivery of an end-to-end mortgage application process? Can we truly see the significant benefits it is purported to bring to us as advisers? We’re told that these systems will save us a huge amount of administration time, an inordinate amount of rekeying client data, which will allow us to concentrate on incomegenerating activities. And yet now most advisers get their clients to key in a large amount of data through online tools which they then transfer into factfinds/applications. We’re told that paying for a system which delivers an end-to-end process will allow us to send our client’s details to 20-plus lenders, but why? Most advisers will do the research, understand the criteria, carry out the sourcing, and submit it to one – this doesn’t really provide the phenomenal time-saving, admin-busting, lender accessibility that these tech firms think it does.

MAY 2019

Breaking it down, with these ‘bells and whistle’ systems we’re being offered, you can’t help think this is all a little bit like the emperor has no clothes on. It’s like being offered a Ferrari but without an engine but with the promise that the engine will be there in three months’ time, however the salesman was saying the same thing 18 months ago. Licenses for these systems currently seem to be running at three times the price of the ones we already use – for a 10-broker firm you’re probably looking at least £1k more each month. To our mind, paying that money for a system which does not deliver what it says it does now – and may not do so in the future either – is a complete false economy. That £1k a month could pay for a significant amount of administration and rekeying work – you’d probably be better off using it for that rather than shelling it out for a system that takes longer and doesn’t actually work Which makes the whole focus and ‘hype’ around end-to-end even more bizarre. Is it just because its tech and we like talking about it? What are the benefits for the consumer? We can see why it might be suitable for a direct-to-consumer proposition which takes advice out of the equation and allows them to find the mortgage themselves, but why on earth would we be supportive of this? A system which is far worse for consumers and far worse for us – it’s turkeys not just voting for Christmas but standing as its representative. To our mind, the tech focus should actually be on customer retention, because we know full well that lenders are concentrating on the technological ways and means to try and get more business direct. Customer retention apps and products would be far more useful than end-to-end and would help us make sure our business comes back to us, not back to the lender. In the grand scheme of things, do consumers or advisers really want end-to-end mortgage application processes? We very much doubt it, so why not use that technological nous, resource, power and investment to deliver what we do want? MORTGAGE INTRODUCER

Review: Technology

The game change for advice has been slow in coming Fintech, proptech, insurtech. If there’s a way to make your business idea sound of the moment, it’s surely to take your sector’s name, slice it in half and add the suffix ‘tech’ to the end of is. We have seen a stream of new businesses launch in the housing market, each promising their tech will ease the pretty painful experience of buying or selling a home. From artificial intelligence and machines learning which mortgage is likely to be right for a customer to platforms designed to allow digital identity verification via a smart phone and online document upload, technological progress in the mortgage market has looked busy. The recent tech phenomenon has not just been confined to mortgage advice. Technology has developed in leaps and bounds across the conveyancing, broking, surveying, lending and search sectors. There are now portals that allow borrowers to communicate with their conveyancer online, that enable a fully secure online documentation of the buying process from mortgage application to exchange of contracts. Valuers use smartphones and tablets to conduct and document property surveys, allowing much more accurate and consistent assessments of the underlying security. Open banking, formally available from January last year with the arrival of the Payment and Services Directive II, theoretically enables automated real-time underwriting of a borrower’s affordability by linking to their current account securely. Credit referencing agencies have worked hard to develop search tools that incorporate borrower eligibility into their mortgage product choices. Even the physical sale of a property has gone online some of which are seriously outperforming several of the more traditional estate agency groups. From all the noise, you’d think that

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Kevin Webb managing director, Legal & General Surveying Services

technology had solved everything. But while for the past three or four years whatever-tech has been heralded with almost blind enthusiasm, I suspect for some, the hard work is really just beginning. It is now three years since the first mortgage adviser styling itself as ‘robo’ launched into the market; it has been followed by multiple others – to varying degrees of success. What was announced as AIpowered mortgage advice for the millennial market has morphed into other things as business owners with a tech background came to see the value in a person handling the mortgage advice process. The so-called game change for advice has been slow in coming.

“The recent mortgage markets study published by the Financial Conduct Authority has also called out the industry for failing to deliver technology that served the customer’s interests sufficiently” As the investment industry discovered before us, developing successful solutions is no overnight success story. Robo-adviser platforms such as Nutmeg have never turned a profit. Millennial bank Monzo is burning through cash and last year posted overall losses in the 12 months to February 2018 rocketed to £33.1m from £7.9m the previous year. They are by no means alone. Many of the start-ups that have emerged in the mortgage market over the past five years have since disappeared. Those that remain have adopted a number of approaches to survive, ranging from throwing ad spend at the problem to shifting their MAY 2019

business models from broker to lender. The estate agency market is going through something similar: analysts raise questions about the refusal of some players to publish figures on actual completed sales. The recent mortgage markets study published by the Financial Conduct Authority has also called out the industry for failing to deliver technology that served the customer’s interests sufficiently. Indeed, the inability for consumers (and brokers for that matter) to identify the best product for their needs that they would qualify for was singled out as a market failure. The regulator has set the industry a fairly explicit challenge: “On giving consumers a clearer idea of the products for which they qualify, over the coming months we would like to see tangible outputs from the effort firms have put into giving and/or getting access to qualification information.” This is a big ask in an industry where qualification criteria is jealously guarded by lenders. It is the basis for competition, particularly in a market where prolonged low interest rates have resulted in very little price competition between the biggest providers. Understanding the qualification game has also been the bread and butter of the broker – the true value of a product recommendation that favours one lender’s 5-year fix at 2.5% over another’s 5-year fix at 2.49%. How this is addressed could prove to become the game changer. But it will require a level of co-operation that has been slow to appear in the past. Who knows this future will look like and how it will affect the market. One thing’s for sure though, there will inevitably be more tech before long. Technology is a global force and as the transformation of increasingly complex processes gets underway, we will encounter challenges that go way beyond pure logistics. Changing our world as it is to a digital one is one task – the real win is using the technology to re-invent processes we currently rely on. That is the holy grail. www.mortgageintroducer.com

Review: Technology

A long way to go before a zero-question solution The customer’s experience of buying something or interacting with a business in any industry is essential to that business’s success. It’s especially true for the insurance industry, where the customer’s perspective is often tinged with resentment over how much they are charged for something they don’t really want to buy and for what is ultimately an indefinite payout should they have to make a claim. That’s why so much of the digital transformation that has been taking place within the industry has been focused on making the customer journey smoother, more personal, more convenient. Technology drives convenience and the rise of mobile-first technology including apps means that our customers have come to expect seamless interactions in all areas of their lives – and insurance is no exception. And they expect these interactions to be immediate. In a world where they can order certain goods from Amazon and receive them in an hour, they demand a similar service from others. So it’s no surprise that much of the focus amongst insurers and their distribution partners has been on making the quote process a whole lot quicker. Back in 2017, Aviva announced that it was plotting a ‘game changer’ in insurance by rolling out policies where customers wouldn’t have to answer a single question by using big data to cut out the hundreds of questions it was asking. Fast forward to today, you can get a quote from AvivaPlus by simply putting in your name and address and acknowledging if certain statements are true. If you have had no home claims within the past five years and haven’t selected the ‘false’ response to any of the statements, you can get a quote in less than a minute. Earlier this year, Legal & General launched SmartQuote for Intermewww.mortgageintroducer.com

Kevin Paterson managing director, The Source

diaries, using big data and technology to enable brokers to get a home insurance quote in as little as one question – just so long as brokers know basic information about their client. In launching this new proposition, L&G claimed that it was redefining the rules of how advisers and their customers get a quote for home insurance and challenging any lingering misconceptions about the quotation process. As well as making the quote process a quicker, simpler journey for customers, there is the argument that using technology to gather data from other sources such as Land Registry to feed into the quote is also reducing the risk of the customer making any mistakes or providing inaccurate information – and thus reducing the risk of having a home insurance claim rejected further down the line.

“Technology drives convenience and the rise of mobile-first technology including apps means that our customers have come to expect seamless interactions in all areas of their lives” So removing questions, which often repeat themselves or are posed in such a way that the customer hasn’t got a clue how to answer them, must be a good thing – right? And particularly for intermediaries trying to arrange home insurance for their clients after an already lengthy mortgage sales process, anything that can simplify the insurance process must be beneficial to both the adviser and the would-be homeowner. All sounds good, doesn’t it? There are those who argue that aiming for zero question quotes could in fact be detrimental to the customer, runMAY 2019

ning the risk that the customer may feel that they’re not covered for everything. What data sources are there that modern technology stacks could tap into to find out about hobbies that the homeowner may have which could impact the value of their possessions? If they’re a mad keen cyclist for example, how would a zero question approach identify that they have several bikes worth several thousand pounds plus all the gear that goes with them? For an intermediary who constantly has to remind their clients of the value that their advice brings to the process, whether arranging a mortgage or insurance, could this super-fast zero question approach actually result in the customer thinking that the intermediary isn’t really that interested in their own specific needs? Personally, I think the ideal scenario currently lies somewhere in the middle. As a technology-led company, we clearly have the desire and capability to embrace any integration opportunities in order to streamline the quote process. In fact, we spent much of last year working on the configuration of our platform to drastically reduce the time it takes to complete a whole-of-market GI quotation. The quote journey we introduced earlier this year allows intermediaries to complete a standard household quote without the need to run through declarations relating to non-standard risk. However, in our view, the data that is available from external sources is not sufficiently comprehensive enough to fill the gaps and more needs to be done to deliver a zero-question solution that makes the customer feel their individual requirements have been met. But that’s the beauty of embracing the inexorable advancements in technology. There’s always more that can be done and that’s why our team is constantly looking to see how we can enhance the service we provide to intermediaries and their clients and deliver real-life solutions to their real-life issues. MORTGAGE INTRODUCER

Review: The The Month Month That That Was Was Review:

Each Each month month The The Outlaw Outlaw draws some tongue-indraws some tongue-incheek cheek parallels parallels between between society at large society at large and and aa mortgage mortgage market market in in flux flux

BBC: virtue signalling agenda

Countrywide: Doing a Pep

The Outlaw actually met Pardew once. He spent most of the conversation looking over my shoulder into a mirror at himself... former players used to call him Chocolate, as Alan apparently loved ‘Pards’ so much that he’d even lick and eat himself. mercenary-esque LuisBack Suarez FC RIP. But well done LSL. of at theBarca-choker net. Cyril style, now knows that kissing a club’s badge after scoring Remaining in the waters of estate agency super- a goal doesn’t signify antake emotional bond with fans tankers, it might now the management at at all – just that you’re a stupid tw*t. their own Countrywide a few aeonsoverpaid to turn around Thankfully, grotesquely P60 needn’t vessel. It’s nota exactly listingoverweight but it’s lost some turn a person into The an unpopular flawed bouyancy of late. departureand of its CEO individual, could even for execs at one oftoour industry’s surely notoutgoing have been a surprise those within most totemic andand long-standing firms. But more the organisation LSL are certainly doing to on Charcol’s collapse shortly andGuardiola where theisblame Countrywide right now what doingfor that clearly lies. to Moaninho. Hindsight is a facile thing but I take noNope. merit in having remarked at the time that the There are exceptions to this,ill-considered none moresoone. than the appointment was a curiously celebrated Sage Omaha himself, Warren Buffet. Executives fromofother sectors such as Healthcare wealthy but patently Chancellors canWhilst indeed sometimes make useless a difference in financial such as Phillip previously services. FreshHammond ideas etc. and But the more often than not sacked Georgeand Osborne ruminate on how to don’t further these “retailing customer-centric” plays undermine economy and the mortgage industry, work (Andy the Hornby, anyone?). Buffet actually backs his judgement with his own Right. Thank ***k that’s outta the way for another Estate agency is about a relentless water-on-amoneyapproach. – and not It’s yours! year (I speak of course of the Christmas TV snorefest stone unforgiving, uber-competitive “Britain a great place in which to invest, I’m and the subsequent dry January. I don’t know which and prettyismuch a hormonal sales-fest. Notand a place Timethe waits nobody. Not least, the incompetent ready to buy something hereand tomorrow.” was morefor insipid of the two, especially as I fell for anyone without tenacity some cutting edges. and the indolent. As well as Barca-choker FC’sof 1 (Have got hiscase number, I wonder?) pretty hard from the wagon in the early hours And as isCharcol so often the in these scenarios, arrogantista’s! more on who our economic and political climate Feb! A disgraceful overdose on Bombay Sapphire. theBut individuals originally annointed the ‘David Theresa May remains the most useless PM in living shortly. styled appointment have long left the scene Live ‘n learn. Moyes’ memory; the BBC to condescendingly Before that, I’d betterand do without some virtue of The evenings arecontinues drawing out, Spring is almost of their misjudgement any signalling financial loss promote andweeks virtue ‘til signalling mythemselves own. in the air, its it’sliberal only six the USagenda; MastersRBS’s and to incurred. chief executive is on way; our footie teams perform Soany step forward the the National Audit Office. we’re all back on thehis transaction treadmill again, In event, I wish Countrywide teamAn a swift breathless by recoveries; and the boss of under fire inaugural appearance in this column, butfolk thisinnear evidenced confident pronouncements from resurgence as there are some talented that house builder Persimmon receivesacquisition shareholderof 40-year old institution vigilates all viatothe motto lenders and the first intermediary stable (Creffield, Curran and Laker name butHelping The Nation Spend Wisely. backing his £25m pay packet . two long time the year. for Which of course featured three) and allowing LSL or any other behemoth too when it pronounced earlier this month We’ll start with RBS’ Ewen, who to be fair to him industry stalwarts in LSL and PTFS. much slack So is not healthy for the sector. FCA needs to measure its didn’t own has delivered on million the five-year plan which he Onlargely the face of it, five quid appears to be Turning tothat thethe lenders, Santander’s results more assertively we can but himself 2014 within which, we watchful have all aset good dealinfor LSLand although of course totally sparkleeffectiveness but they nonetheless impressed. They hope thatsome our over-cluttered regulator benefitted fromget NatWest’s incredible resilience and punters rarely to see what is actually under the may have conceded miniscule market share notice. support.inAdeals supreme lender bonnet of this kind.and chief executive, as but 2017 takes was the year when their January 9 Secondly, anddomino’d staying with the FCA, measured any balanced For sure,on some regulatoryscorecard. liabilities and announcement on PT’s to become we had many now Notwithstanding, £3.6m annual potential provisions his might feature but,package (for the gift that kept(amongst on giving, andothers then some. thankfully!), Sinclair running a tightly regulated global notwithstanding, my hunchand is that theorganisation) team It’s quaint isn’t it... AMI howgaffer downBob through the being to goperiods into print pales when compared with at LSLinto will insignificance have recovered their initial outlay years we canbrave recallenough some epic again onlenders no less went than three Persimmon’s chief executive, in under threeincoming years and quite possiblyDave where once two scuffling head-toJenkinson. two. A clever bloke that Jon Round and head.matters of FCA over-intervention. I’ll spare you abecame fullsomemainstream soap box, but As ititalso for that matter with the salaries being whilst wasdoes amusing to read that three Before buy-to-let three neat questions for the FCA earned by the following; BBC’s patronising and celebrated baggies fans the in the industry (andthere thenare went needlessly and regulatory answer rightthe now. and perma-tanned Gary Lineker per annum); now “controlled over 25% of its (£1.75m distribution” feral under the to PRA!) it was Birmingham 1. slugfest. Why does it remain ITV’s Ant McPartlin (£12m per Iannum) (admittedly tongue-in-cheek, accept!)who thathimself Midshires versus TMW There was the obsessed withversus the PRICING seemed spend most of last year in a/ ifclinic; and story maytohave less resonance once the Lord’s mutual hara-kiri outcome of the RBS HBOS of products as Charcol opposed to Manchester United’s Sanchez a into Shepherd that is AlanAlexis Pardew leads (£24m their flock tear-up and we also saw several years of Jon Round: Theresa May: Most useless mixing it with London & Country theiras suitability? YEAR !!!)… who like the equally odious and clever bloke the Championship. a duopoly before

The Good, The Good, the Bad, the Bad, the Boring the Boring & the Vulgar & the Vulgar

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MORTGAGEINTRODUCER INTRODUCER MORTGAGE

MAY 2019 2018 FEBRUARY

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2. Why is it being totally distracted by a technological and lender-lobbying ‘sand-box’ bias? 3. If its original MMR interventions promulgated the importance of ADVICE, then why are recent industry consultations seemingly back-sliding on that towards an execution only approach being acceptable? More on each of these topicalities next month. But there is quite a bit here which should be of concern to brokers. Turning to the lenders, Metro continues to flail. An 80% collapse in its share price from peak to trough speaks for itself. Personally, I am less interested in whether its patriarch Vernon Hill put £25m worth of branch refurbishment costs through his missus’ company and more preoccupied by its service levels not living up to the lofty standards set by its underwriting team Photo: Rwendland these past few years. Further, it was perhaps highly coincidental therefore that the FCA last week suggested that a desirable culture within any financial services business was one of simply “doing the right thing”, and not one which was Warren Buffet: anchored purely by a marital Sage of Omaha adherence to statutory rules and regulations. Which brings us penultimately to an organisation and an exec team which appears to have no emotional intelligence or connectivity with its long suffering staff. Let’s face it. The past five years have been good for most of us. Year-on-year market growth; challenger banks galore; governmental assistance for the sector and improved capital availability. There can be only a handful of the nation’s top 100 brokerages who haven’t seen year-on-year growth and improved profitability. Against that backcloth we have had a pretty much bemusing set of announcements occurring at John Charcol, a business which skillfully apprenticed and brought through so many of today’s mortgage industry titans… and which is now almost a zombie vessel, rudderless and listing Bob Sinclair: badly in benign waters, not even brave choppy ones. It’s a tale of hubris, absent landlordism and stubbornness. And sadly, some very decent folk losing their jobs needlessly. For if well placed industry stalwarts are to

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Barca: a helluva beating

be believed, the business had more than one offer of reparable financial assistance last year. Hopefully this still iconic marquee won’t become a modern day Everyman fable featuring pride before a fall. Which brings us (I know, as ever!!) neatly back to Brexit and the upcoming Euro elections and ergo, future economic conditions for us brokers. Thankfully, whilst the incessant squealing from the likes of Lineker, Soubrey, Bercow and Geldof is still for Britain to remain members of a continental and recession-bound vanity project, Europe’s far flung populaces are now seeing this clothes-less Emperor in all its nudity. Electors are fatigued with an interfering and bureaucratic EU and its profligate dogma of social liberalism. Countries such as Italy, Austria, Poland, Hungary and Estonia would leave tomorrow if they had a fraction of the economic sustenance that the UK has (record employment, low interest rates, acceptable GDP ratios etc). And in Scandinavia and Eastern Europe, folk are rapidly deserting the wishy-washy parties of the centre ground. Our disgraceful national broadcaster likes to hold its nose and term these fed up classes as “the far right”. Maybe once the actual Euro-results endorse the fact that huge swathes of the continent no longer believe in the indulgent Brussels elite, some of our own poor snowflakes might also wake up and realise that EU interference in our everyday lives is finally on the wane. They patronise us. And we’ll probably sing and finish last at Euroshite Vision once again. But the EU’s Charcol is all but burnt out. Barca, Ajax, Frankfurt, Valencia and Brussels… your boys took a helluva beating. I’ll be seeing you. MAY 2019

MORTGAGE INTRODUCER

The Bigger Issue

The FCA is concerned that seconds and sub-prime lenders profit from

Should seconds discussion be I think the second charge mortgage industry would take issue with anyone assuming that it provides sub-prime products. In actual fact, second charge is increasingly used by customers to improve or extend their homes, provide investment capital for a small business or help Fiona Hoyle a family member with a deposit to head of buy their first home. consumer As we all know, it’s the product and mortgage of choice for those who do not finance, want to disturb their first charge Finance mortgage and possibly lose a low & Leasing fixed-rate deal. Second mortgages Association have been specifically designed to avoid this and give the “It’s the customer the option of paying back the loan over a product for shorter period of time than those who do would be the case with first charge. not want to Second mortgage lenddisturb their ing was up 20% by value (to £98m) and 24% by first charge volume in February 2019, mortgage” compared with the same month in 2018. This was the strongest monthly growth in new business volumes since May 2017 and this suggests that knowledge of second charge mortgages among brokers is growing. That said, the market is still well below its pre-crisis level of £5bn – and the average second charge mortgage advance is a very modest £45,359. Interest rates are at their lowest level – typically between 3-5% – which doesn’t imply a large sub-prime customer base, and the number of properties repossessed is extremely low at 28 in the final quarter of 2018, down by 26.3% compared to the same period in 2017. In 2018 overall, the number of repossessions represented 0.09% of the number of outstanding agreements in that year. Since 2016, the sector has been regulated under the same rigorous regime and with the same level of scrutiny as first mortgages by the Financial Conduct Authority – and all mortgage applications go through a detailed underwriting process.

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Unfortunately, you would have to say that the FCA’s broad-brush approach to these sectors – particularly second-charge – is doing it an incredible disservice. For a start, while the regulator could have seen some cases where there might be a similarity between subRory Joseph prime and second charge, these director and are two very different sectors and Sebastian lumping them together in such a Murphy way helps no-one. To give context head of to this, over the past year we’ve mortgage probably written more secondfinance, JLM charge business than we’ve ever Mortgage done. The reasoning behind this Services is quite simple – we either have clients with a good deal but a high ERC and therefore they don’t want to remortgage but do want to release equity, or we have a mortgage prisoner type client who again can’t remortgage but wants to access the value in the house. None of the clients we have seen are anywhere near what you might describe as ‘subprime’ and let’s not forget they still have to fit into an affordability matrix in order to secure the mortgage. The point is that, you can “These are two get some very keen rates very different on second-charges at the moment – sub-4% – and sectors and while we might agree that lumping them arrangement fees can be high, the amount of these together helps loans tends to be low, and no-one” if we came across a client where such costs outweighed paying back the ERC, for example, we would advise them to do the latter and remortgage instead. The FCA’s conclusion that lenders are somehow lending to those they know won’t be able to pay in order to charge them greater fees seems a completely self-defeating approach to take as a lender, and it certainly wouldn’t chime with the recommendations we as advisers would make to a client. We can’t quite see the link between seconds and sub-prime and perhaps the FCA might be advised to look at each sector’s issues separately rather than attempting to produce a link that simply isn’t there.

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people struggling to repay

e combined with sub-prime? Having worked in the finance industry for several decades now, I have seen many notable shifts and economic downturns. From global recessions and general elections through to market booms and the current Brexit uncertainty, these cycles inevitably affect lenders and Paresh Raja borrowers alike. chief executive, The Financial Conduct Authority Market is concerned that second charge Financial and sub-prime lenders are taking Solutions advantage of those stuck in complicated and demanding financial situations. So what can be done about this? It has been suggested “Second charge that second charge and sub-prime loans should be and sub-prime lumped together. While this products might make some difference, I believe this would have different only serve as a short-term functions” remedy, and one that overlooks the bigger issues at hand. Let’s not forget: second charge and subprime products have different functions. Their use very much depends on the borrower and their personal circumstances. Grouping second charge and subprime loans into the same category risks undermining the flexibility and dynamism of second charge types of lending, making them more rigid and difficult to adapt to a borrower’s individual circumstances. After all, someone taking a second charge loan maybe using this to release some equity in order to improve the value of their buy-to-let property. In such a circumstance, a borrower can find it extremely different to access a loan from a mainstream lender or high street bank, which is why they typically turn to a bridging lender like MFS. That’s why all lenders – be it those issuing mortgages, sub-prime or second charge loans – have to conduct the necessary due diligence to ensure responsible lending at all times. We only do first and second charge bridging which is completely different in that it’s a short-term loan and we ensure there is always an exit strategy. Above all, for those seeking a second charge or sub-prime loan, it is vital to seek independent financial advice beforehand.

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The Financial Conduct Authority’s decision to review any aspect of our industry should be welcomed if it helps to ensure customers are getting the best advice and benefits on their financial products. Since the implementation of the Danny Belton Mortgage Credit Directive, there head of lender has been a greater awareness of relationships, the second charge market, and Legal & although it remains a relatively General small market, a good number of Mortgage Club customers have benefited from the criteria and products available today. This includes those on low base-rate tracker products or with potentially high early repayment charges that are looking for extra borrowing without disturbing their current first charge borrowing arrangements. Interestingly, the average loan-to-value of a customer taking out a second charge loan is around 60% and the average loan size is close to £50,000. Many of these customers have strong credit profiles and so will not be classed as or require ‘subprime’ lending options. Now that both the Mortgage Market Review and MCD have been embedded into the sales process, whether “Whether the the customer requires a customer second charge loan or a loan that will accept a requires a degree of adverse credit, second charge brokers are required to follow strict affordability loan or a loan checks and stress-testing. that will accept This means assessing all customers to ensure that a degree of they do not take on debt adverse credit, that they cannot repay. Therefore, the overall brokers are quality of business required to generated from brokers on these loans is very follow strict good and in many cases a affordability broker may either charge only a small fee or will not checks” charge at all. MAY 2019

MORTGAGE INTRODUCER

Interview Cover

A matter of Principal Mortgage Introducer meets Principality Building Society chief executive Steve Hughes in its Cardiff heartland, as he discusses his vision of making the society locally loved and nationally famous Since joining the society as deputy finance director in 2012, Steve Hughes says there’s been a laser focus on transforming mortgages and savings since. Over those years the business increased the size of its balance sheet from £6.7bn to £9.7bn, with mortgages being a major part of that. He is conscious of the weight of history at the society, which was founded in 1860, at a time when the population of Cardiff, then just a market town, was 33,000. Principality was established in Church Street and was known as Principality Permanent Investment Building Society. “A group of forward looking members felt it was a good idea to pool some savings and lend it to people to help them build their own homes. Income for the first year amounted to a modest £367. 159 years on our society has assets of near £10bn but our purpose and strategy is clearer than ever. We want to help people prosper and continue to provide our savers with a safe and secure home for their savings, offering competitive returns, stand out service and support members and customers in fulfilling their aspiration of owning or renting their own home. We want to be famous as a challenger brand renowned for its personal service to intermediaries and members,” says Hughes. Principality is in residential, buyto-let and commercial lending. It lends to professional landlords and those in the residential development space, while it has a strong

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MAY 2019

focus on funding social housing. Hughes says his vision is for the business to be locally loved in its Welsh heartland but be nationally famous across the UK. Currently 85% of Principality’s business is through intermediary partners, with 70% of mortgages being in England and 30% in Wales.

From Strongbow to Lloyds TSB

Hughes didn’t go to university, as he went straight from his A Levels into an accountancy apprenticeship, studying through day release and night school. His career started in automotive components in his 20s, after which he went into consumer goods and retail, working with brands like Strongbow, Carling and Royal Doulton. Hughes then decided to go into financial services, as he joined what was then known as Lloyds TSB in general insurance. Lloyds TSB merged with HBOS in September 2008 and he became finance director of the joint GI business. This gave him something of a window into mortgages, especially as GI was sold on the back of mortgages from Halifax, BM Solutions and former lender Cheltenham & Gloucester. Hughes turned down an opportunity to IPO a major general insurer to join Principality instead. “It was a brand I believed in and I was really interested in working for a mutual business where you could play the long game, rather

than short-term decision making,” he reflects. “I was excited by the opportunity to get my arms around a business and have a direct impact.” He initially came on board as deputy finance director, before being promoted to finance director within his first 12 months. He was also handed responsibility for strategy, IT and change. Hughes got the chief executive role two years ago, replacing Graeme Yorston, who stepped down after nearly five years in the role.

Know your roots

Joining Principality represented something of a return to Hughes’ roots, who grew up in Swansea and knew the brand from his childhood. “We are the number one children’s provider in Wales, so most recognise Principality as the brand where they took their passbook to pay their pocket money in,” he explains. Hughes had moved away for the good of his career, with his Lloyds TSB roles involving roaming around the country: in Newport, Leeds, Halifax, Shannon in the Republic of Ireland, Edinburgh and London’s Gresham Street. While life on the road can be enjoyable for a young man, he admits: “An important part of my decision for joining Principality, was coming back to Wales,” he says. “Being around my young sons was important – they’d missed

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Cover

out a lot on their dad as I travelled across the UK and the world earlier in my career. That was an important part of my decision, to try and get the right work-life balance for me and my family.” He’s still something of a workaholic, as he leaves the house at around 6am and gets back at 8pm – commuting from Swansea to Cardiff. But he adds: “It’s a balance of sorts – I’m able to see my youngest son put to bed most evenings.”

with rugby union Hughes supports The Ospreys, who play their matches at the same stadium as the football team. Nowadays he attends both football and rugby with his three young sons, who are 15, 12 and seven years old. “My weekends are taken up ferrying them to various football and rugby matches and standing on the touchline supporting them,” Hughes says. “I’m a sport nut to be honest.”

Sports enthusiast

Principality Stadium

Hughes has been a Swansea City season ticket holder for the best part of 40 years, while he used to go to matches with his dad. And

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Like many a Welshman, Hughes has enjoyed the performance of the Wales rugby union team, which won the Grand Slam at the MAY 2019

Six Nations Championship this year. But with Hughes it’s not just patriotism at stake; it’s also beneficial to Principality owing to its sponsorship of the national stadium, which was renamed from the Millennium Stadium to the Principality Stadium in 2016, in what was a 10-year sponsorship deal. Hughes has since pushed for more rugby union sponsorship deals, including sponsoring the pitch. “I was finance director at the time the deal was negotiated,” he adds. “As an executive team we wanted the right value for money for our members and the  MORTGAGE INTRODUCER

Cover

return on investment was where it should be. We wanted our name on the stadium to increase the awareness of our brand across the border, so people would associate the biggest building society in Wales with such an iconic sporting arena. It has created a greater awareness of the Principality brand and has also benefitted the communities our members live in. However, the benefits go beyond rugby and sport. We have linked with our charity partners to raise cash for their charities via ticket auctions and have also given people who might not otherwise have had the opportunity, to watch major events at the stadium. We have also been able to give away almost a thousand tickets to our members to reward them for their loyalty.”

feel much closer to the operation here in Cardiff,” Hughes adds. “One of the things I’ve worked hard to do is build one business with better teamwork, fewer siloes and more end-to-end thinking in terms of providing a great service to our members and customers.” Asked if this same technology could be used to give customers advice online, Hughes is open minded. “I think that is something we could do eventually,” he says. “Someone could logon to their desktop or iPad and plug into the branch – that could be a logical extension of our proposition.”

Regional hotspots

Two years as CEO

Since becoming chief executive in 2017 Hughes has attempted to break down barriers between the management team and staff. In his first 100 days in the role he visited every one of the 71 branches in Wales and around the English border to get a sense of what the business means to members and colleagues. He also met with some of the major broker networks to understand the perspectives of intermediary partners. He then had the executive team sit on the same floor as its staff. “That accessibility to leadership is really important and I’ve put my stamp on that in my first two years,” Hughes says proudly. He also championed the refurbishment of many of its branches. This includes the development of Principality Connected in March, which allows customers to walk into a branch on one side of the country and speak to an adviser elsewhere via video link. Using the same technology Principality streamed its latest annual conference across every branch in Wales. “It allows our branch colleagues who are geographically distant to

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MAY 2019

House price growth is higher in Wales than England and Scotland, increasing by 4.1% in the year to February 2019, Office for National Statistics data shows. Hughes says the East of Wales has been given a boost by the removal of the Severn Bridges tolls on 17 December 2018, meaning you don’t have to pay to drive from England and Wales. That’s led to cities and towns in Monmouthshire achieving strong house price gains, while Newport saw prices rise by 10.6% over the course of 2018 according to Land Registry data. “If you look at Wales, we have strong areas of traditional industrial towns which have traditionally been terraced houses,” summarises Hughes. “You’ve got commuter belt territories on the edge of cities, where you have more detached houses and a really strong coastal presence in holiday towns – there’s quite a lot of holiday let. “Cardiff is a very buoyant market. It’s a city where there’s been significant investment in terms of job and wealth creation. House prices in Cardiff are higher than Swansea and Newport for example.”

A reduction in profit

Principality’s underlying pre-tax profit fell from £53.4m in 2017 to £43.8m in 2018 – but Hughes says this was part of a plan.

“We planned for profit to fall,” he insists. “We invested in technology – there was a conscious decision to invest profit in transforming business for the long-term.” Hughes highlights ‘three or four key pillars’ when it comes to transforming the business. The society is developing a digital savings and mobile app and there is an appetite to transform the mortgage origination journey. Also important is investing in treasury management and balance sheet capabilities, while refurbing branches is another focus. Principality announced earlier this month that it has chosen IRESS’ mortgage sales and originations (MSO) to help transform its core mortgage platform. Hughes said: “We chose IRESS as they are a leading supplier of innovative technology solutions within the mortgage market. MSO will make the mortgage journey simpler for brokers, customers, colleagues, allowing faster offer times and a seamless experience. It will allow us to give brokers access to their cases, an easier registration process, simple document sharing and the removal of manual customer signatures. The technology will also provide us with the capability to expand the breadth of our products. “It is a challenging but exciting period in Principality’s history as we look to secure the future of the business for our next generation of borrowers.” Principality has also invested in open architecture in preparation for new mortgage technology it may be able to integrate via Application Programming Interfaces (APIs). It seems the focus is about future proofing the business rather than focusing on making as much as possible in the short-term. “We use a strapline here that we want the next 159 years to be as successful as the first 159,” Hughes says. “We need to make sure we continue to provide what our current members demand, but also 

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The Mill in Canton development Principality has led the way with a housebuilding initiative in partnership with the Welsh government and the developer Lovells. The development is for The Mill in Canton, Cardiff, a derelict former paper mill site called Old Ely Mill near Cardiff City FC’s football stadium on the edge of the city. By the end of the year the site should have produced 300 homes, with 100 rented homes being occupied. Principality is providing development funding and bridging funding until institutional funding comes in, while in the early phases the society was involved in financing roads and sewers infrastructure.

Great opportunity

“It was a great opportunity for collaboration,” says Peter Hughes, managing director of Principality Commercial. “We found this was the site where we could use some of our principles – with quality housing and an environment close to the city centre where you’ve got a need for homes to support job creation.” Discussions regarding the site started in 2012, while government support was needed to clean up contamination of the area before building could start. There are now plans for a Metro station close to the site, which will eventually produce 800 homes, 442 of which will be for rent. The rented homes will be managed by Cadwyn Housing Association, a Cardiff-based housing association. Lovells is also developing 358 homes for sale - for which there has been heavy demand.

Principality isn’t the only building society to get involved in housebuilding, as Nationwide is funding a housing project at Oakfield in Swindon, which Hughes says is another positive development.

Robust demand

“I don’t think we would take such a leading role as here but there are a number of initiatives where we will be able to take the learnings from this to other sites,” he adds. “This was an acid test in terms of collaboration on a really big site. “Two of the schemes we are looking at we will be able to take a similarly constructive role but less in terms of a leadership piece. “Ultimately we are not a developer, we are a lender – a commercial mortgage lender.” The society is looking at collaborating on future projects in Newport and in the South Wales Valleys.

He reveals that demand for development finance seems to have stayed robust, despite dampened down market conditions elsewhere. “Clearly the market is not as buoyant as it was in terms of development, but we’ve not seen a big slowdown as of yet, which is encouraging,” Hughes says. “That’s continuing to provide an underpinning to the residential market. The new build product, if priced appropriately, will sell. The rented homes will always go. “There is a waiting list of over a thousand people for homes on the site and there’s a big waiting list for the owner occupier houses as well.” Clearly developments like The Mill in Canton are not only helpful for local communities given the UK’s housing shortage – they can be a reliable source of business for the building society sector.

Acid test

Hughes was asked whether this could be the start of something at Principality.

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what members of the future will demand. Also for what our intermediary partners will demand in terms of slick seamless mortgage origination capability. “Technology transformation isn’t necessarily about the current model not working – it’s about future proofing your business for the next generation.” Principality grew its lending by over £700m in 2018.

Diverse offering

The state of the market is commonly referred to as ‘challenging’, and Hughes admits it’s tough to compete with a wall of cash from the high street. This makes it more important than ever for Principality to be lean and efficient. “We still participate heavily in the remortgage business because that’s low risk,” Hughes says. “It’s thinner margin business but we have to participate in that.” Other areas that are important to Principality are consumer segments that have a need and can benefit from individual underwriting, like junior doctors who may have additional income from private work on the weekends. Meanwhile Hughes says holiday let and professional let are important and profitable areas that the society will continue targeting in the next few years. Finally development and commercial finance are other areas where pricing is less important than being dependable, so that’s another attractive area for Principality.

Later life and intergenerational

Hughes seems to have an appetite to go into later life and intergenerational business. “It’s definitely part of the market that we would consider entering – later life lending, intergenerational wealth transfer,” he says. “They are important parts of the market and would certainly be part of our member offering.” A Daily Mail report found that just 112 RIOs were sold last year – but Hughes isn’t put off. “Sometimes the press head-

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lines outweigh the size of the market in the early days,” he adds. “Over time as the product gains greater credibility and relevance I still think that will be a growing segment.”

First-time buyers

Within Wales, Hughes says much of its lending is to first-time buyers, as Principality sees helping this demographic as integral to its social purpose of helping people

Nemo Principality closed second charge lending business Nemo Personal Finance in 2016, as nowadays it no longer offers a second charge service or refers business elsewhere. “Nemo had been a really successful business for the organisation,” Steve Hughes explains. “At that stage we were very focused on growing our core residential mortgage business. “We were able to determine that a better use of members’ capital would be to direct that to growing our residential business. “So we made the difficult decision at that time to put the Nemo business into runoff and stop originating new business.” Nemo now has a balance sheet of £236.7m.

MAY 2019

onto the housing ladder. The average house price in Wales is £160,000 (ONS), a far cry from the sky-high prices in London and the South East of England. “We made a conscious decision that we will do the £100m of higher LTV first-time buyer lending in our heartland,” Hughes says. In future Principality will do more to lend to first-time buyers outside of Wales, he adds. The society currently has a limited branch presence in England, with branches in Chester, Shrewsbury, Hereford and Ross-on-Wye – all near the Welsh border.

Educating the next generation

Talking of social purpose, Principality is investing some of its dormant funds directly into local schools with a GCSE-equivalent qualification in financial education. Principality is partnering with the London Institute of Banking & Finance to provide a curriculum largely delivered by maths and economics teachers – while society volunteers help with the teaching. Students learn about subjects like budgeting, planning,

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History of Principality

mortgages, savings, pensions, APRs. Hughes said that in the next 24 months 5,000 children in Wales will have benefitted from this new qualification. “It’s a unique way of providing the best generation of savers and borrowers with a really practical qualification,” he says. “My vision? I’d love that in the Welsh curriculum, so it became something the Welsh government supported for every child in Wales. That could have a meaningful impact.”

Educating Principality staff

It’s not just regarding schools that Hughes talks up the role of education, as he says he wants Principality to work with its staff to unlock their potential. “As someone who wasn’t university educated, I benefitted from people having a strong hand in my career, sponsoring me and supporting me,” Hughes reflects. “And that’s a real personal passion for me as a leader, to make sure people can fulfil their careers here at Principality. “It can be qualification, leadership development, helping them

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A mutual society, owned by and run for its 500,000 customers, Principality is the UK’s sixth largest building society, with assets of almost £10bn.It has over 70 branches and agencies across Wales. It was founded in 1860 in Cardiff by William Sanders as a mutual building society. In 1914 the Principality buildings were built to house the society. Principality acquired Parkhurst and Peter Alan estate agents in 1987, and the merged entity was later sold to Connells Group for £16.4m in 2014. A site for a new head office to accommodate the expanding business was acquired in 1989 and Principality House in The Friary, Cardiff, was opened in 1992. The following building societies merged into the Principality Building Society: Bridgend Building Society in 1959, Urban Building Society in 1962, Maesteg Permanent Benefit Society in 1968, Aberavon Mutual Permanent Building Society in 1974, Swansea & Carmarthen Building Society in 1974, Llanelli Permanent Building Society in 1977, District Building Society in 1978, Gorseinon Building Society in 1979 and Chatham Building Society in 1985. In 2002, Principality formed a commercial lending division. In 2003 the society launched a website and in 2004 acquired the financial brokerage, Loan Link, later becoming Nemo Personal Finance. In 2005 the society began sponsoring WRU’s Principality Building Society Premiership. In 2010 Principality gave its support to Only Boys Aloud, the initiative to find the next generation of male choral singers from the Welsh valleys. In 2011, plans were approved for 800 homes to be built on the site of the Old Ely Mill in Cardiff, creating affordable housing and hundreds of jobs, in a deal led by Principality Commercial and the Welsh government. The Mill Canton is seen as a great example of collaborative work between crosssector companies. On 8 September 2015 the society purchased the naming rights to the Millennium Stadium in a 10-year deal. Since 1 January 2016 it has been known as the Principality Stadium. Steve Hughes, Principality’s chief executive, is also chair of BITC (Business in the Community). Principality will raise money for two charities during the next three years – Alzheimer’s Society Cymru and Teenage Cancer Trust Cymru. make the right decisions in term of their career paths. That stuff’s really important. Our colleague engagement is really strong.” The staff at Principality are encouraged to move jobs or geographically at the society to keep things fresh. Principality ranked 13th in the super-large employer category of the UK Best Workplace awards by Great Place to Work in 2019.

Locally loved and nationally famous

Hughes wants to continue putting Principality on the map. “Principality are a strong Welsh brand with fantastic recognition from its existing members,” he says. “We have an aspiration to MAY 2019

grow our brand outside of Wales both from a mortgage business perspective, which we are doing through intermediary partners, and savers. “We are a really purposeful business. We want a be a challenger brand, in terms of where we lend, how we lend, the role we play in our communities, the support of financial education in Wales and our charity partners. I think we do that in a meaningful way.” Steve Hughes has already put his stamp on the building society in his first two years at the helm – and there’s surely more to come as he looks to make Principality Building Society famous, without forgetting its roots.  MORTGAGE INTRODUCER

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The state of tech Our panel discuss how connected the mortgage journey is, the role of the FCA and how you can use tech to retain customers Ryan Bembridge: How close are we to achieving a connected mortgage journey from the adviser to the lender with integration and no rekeying? Phil Bailey: We are getting closer day-by-day. If you had asked me last year I’d have said we’re quite a way away. However lenders see the value in a connected industry and intermediaries being connected and transferring data in one button. If you can get onto the CRM and packager systems and on the lenders’ front and back end I think we’re quite close. We have a few lenders live and we’ll have more this year. We have five or six of us in the market playing in the right space to connect lenders together. It’s not a one-horse race. It’s going to be various people from the likes of L&C, ourselves, Trussle and Mortgage Brain. Everyone’s doing this to connect. RB: And there’s competition. PB: Yeah and that’s good because if one person has the route in, the gateway to the lenders, that’s never a good thing. I think the way we work in an intermediary world everyone needs to be connected. Vince Sammon: To make it worthwhile to the lenders there needs to be various routes in. In terms of investing and putting the time into making the journey as seamless, it needs to be available to the masses. Steve Carruthers: IRESS is connecting brokers and lenders. We’re going to be working with

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Principality and there’s more to come. We already work with Barclays and the likes of Atom Bank and TSB Bank. Everybody is talking to everybody. It appears there’s so many people trying to do something and everyone’s trying to see the wood from the trees. From the conversations we have with lenders and smaller regional lenders like those in the specialist sector and building societies, we find they’re not quite sure who’s doing what and what’s available. That’s part of the challenge we have at the moment. We’re more connected than we’ve ever been but I still think there’s a way to go and a lot more understanding is yet to happen on who does what and what’s the best solution. RB: Is it harder for bigger lenders to make tech changes? PB: Of course, but they have gravitas, brand and massive products and structure and liability and manage risk very well. Meanwhile smaller lenders and building societies are more quirky and bespoke and have some of their portals not connected to the back end, but they’re the ones who could gain the most traction by levelling the playing field with larger lenders. The problem is they don’t have the money to spend or the time to change their particular back office systems. SC: The challenge that the small regional lenders and specialist lenders have, having come from that sector, is to survive in this market because they can’t compete on

price. A more connected market gives these smaller lenders wider distribution. Traditionally many would just operate in their heartland but now they see connectivity as a great opportunity to widen their distribution and take their more niche type proposition to a wider market and not necessarily compete head on with price. Craig Calder: It’s interesting because the cost is assumed to be borne by the lender; I think it’s all been borne by the lender, but I think something will have to give. As a lender we won’t back one provider because we can’t. You have to go with a broad range in the market. Does that mean we have to do the same piece of work three, four or five times? Something has to give on the cost there. There is a danger it’ll exclude some of the smaller players which isn’t right. There almost needs to be a set of principles agreed at an industry level perhaps by UK Finance, saying ‘this is how you do this and how you collect and transfer data and how you compare’. It’s people that can reprioritise some funding to make this happen versus some smaller lenders that can’t. That’s not good for the industry and customers. RB: What needs to be done then to improve things when it comes to connectivity? Dilpreet Bhagrath: One thing would be transparency of criteria with lenders. I know we’ve been aligning a lot with what data we’ve been collecting versus what the

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(From L to R) Phil Bailey, Twenty7Tec; Vince Sammon, Ladder; Rameez Zafar, Eligible; Steve Carruthers, IRESS; Stevie Wimlett, HLPartnership; Nicola Firth, Knowledge Bank; David Hollingworth, L&C Mortgages; Craig Calder, Barclays; Dilpreet Bhagrath, Trussle

lender actually needs in applications, but it varies so much depending on the lender and underwriter on the case. So I think transparency with criteria will help us connect the journey. Rameez Zafar: From a technical perspective all third parties in this ecosystem we’re building have to touch core banking platforms and that’s difficult. That ecosystem needs to change where all the APIs are touching something else and there’s an intermediary layer in between core banking and third-party providers that can live inside the banking ecosystem. That’ll make this much faster for everybody. They want to do this but that’s the technical challenge and there’s a backlog that’s two years long unfortunately. There’s risk requirements and regulatory requirements and they’re changing all the time which makes it difficult. PB: Affordability is a huge issue. If you’re a lender I can’t see you

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wanting to expose your affordability in an API until the regulator tells you. I probably wouldn’t. CC: I don’t think it’s that hard to work out to be honest. On an affordability calculator it’s simple. PB: Yours is and there’s a few that are. And some get a lot of DIPs because of the affordability. CC: If you have lots of criteria it’s too hard to manage so the more you can simplify it the better. The breadth of the market is there. A lot of people might use five or six key lenders because they have a good understanding. You’ll never get to the point where all lenders have the same criteria or question sets or the same order of questions or what they ask for in a DIP situation, but they can get pretty close. If the industry works together more could we bring that type of approach together? MAY 2019

PB: It doesn’t have to be perfect. We always wait for this perfect example of everything seamlessly working. You click a button and your advice is a 15-minute chat with the customer. We’re not going to get to that perfect journey anytime soon so we need those quick wins along the way, so we need the affordability upfront, the DIP with one button and the two-way APIs back and forth. Not everyone will be on the same page. A lot of pieces of the puzzles can be joined together to create a better place. RB: How can sourcing systems improve when it comes to the service they provide? PB: I think its education more than anything. We try and get someone 80% of the way there because if we do everything we’re kind of stepping on someone’s toes on the value they’re adding. Also, as well as working for brokers, our  MORTGAGE INTRODUCER

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sourcing systems work for a digital firm, an aggregator and a comparison website. For brokers sourcing systems are about as good as they need to get. I don’t think they need credit scores and affordability. I think there’s some ground we could cover to make it more connected but as a research platform most sourcing systems are pretty good. If they were perfect the broker wouldn’t really need to be qualified to do anything.

mean by true cost. They care about their monthly payment and that number being as low as possible.

CC: Do you think there should be fewer options on what you source? Is it total cost over two years or five years, do you include or exclude fees, do you add ERCs or not?

VC: Clients don’t ask for the cheapest mortgage, they ask for the best, and you have to define what that is.

CC: It’s interesting how you define cheapest though, because is that the cheapest lowest monthly payment or the payment over the two years? RZ: Precisely. There’s an education journey that helps someone understand that.

David Hollingworth: It’s a research platform for the broker as a starting point and then they help educate the customer on why the lowest monthly payment won’t be the right one for them.

PB: There are too many products. Everyone has massive numbers that add up to more than the brokers in the industry because most brokers have multiple sourcing systems. Out of the 10,000 that use us now 62% have their default results on true cost over the initial term which is a good thing. Two years ago that was less than 2%. That’s down to networks driving this adoption of ‘that’s the right thing to do it’ and that’s a good thing that’s taken years to achieve. It takes a trigger in the industry for everyone else to start doing it. Hopefully the regulator starts to enforce these rules a little more.

VC: It’s also the cheapest rate for the client because some lenders may not do deals for certain types of clients. Nicola Firth: That goes back to

the transparency of criteria. The step before product sourcing is you only need to see the products you’re eligible for because it’s based on criteria. PB: The criteria sourcing seems to have replaced quick quote. Now everyone does a criteria source because it seems to be the right thing to do and traditional brokers who’ve been in the industry for a long time go into sourcing and generally try to make it fit into the lender they have in their head. Many try to get sourcing to fit the product they’ve already applied for and that’s creating a rod for their own back. They’ve been around for years and have always done it the same way and unfortunately there’s quite a few of them in the market. NF: Also, it’s a mindset. If you look for the cheapest deal and if you don’t pick the top five on the product sourcing you need a good reason and to evidence that. I think that mentality of it having to be the cheapest product has to change. It’s not always the cheapest product. It’s down to affordability, criteria, the product and speed of service, making it the right mortgage recommendation. VS: I think good brokers have been, and should be, doing that.

CC: Should we just say that’s the way you should source?

RB: Most advisers say they do it anyway and were surprised it’s not already a rule.

PB: I think that’d solve a lot of problems. That would mean everyone would be on the same page. It’s down to education.

NF: As a broker if you went for a 2-year fix you had to say why. Brokers explain to the client if a 2-year or 5-year fix is better for them. Brokers have always been having those conversations and now the only difference is they

RZ: We do a lot of consumer research and first-time remortgagors do not understand what we

Refreshing remortgage criteria

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to be joined. Criteria and product go hand in hand and there’s an inevitability that will happen. RZ: It can’t be computer says no. PB: There are certain lenders we know who won’t do certain types of business.

have to write it down. I don’t believe it changes anything. I think that’s what good brokers have always been doing. I know BDMs come in and tell you how to play the sourcing systems to get them to the top and before Knowledge Bank there was no evidence around criteria so you could get away with saying anything. RB: Is it the case of improving the practices of some advisers but having no difference on the good ones? CC: Absolutely. PB: The FCA talks about if you go back a few years you couldn’t talk about historic searching results but now you can do that and go back to a point in time and check what was available then. There’s rarely one product that’s best for a customer with about 10,000, 12,000 core products and 22,000 variants of all the fees and packages and versions of it. The chances of one product coming up as top of that list is pretty slim. NF: And it protects advisers as well with evidence of research like what we do with criteria, showing at this

point of time this lender said that was what their criteria was. DB: I think there’s a number of scenarios when there’s clearly a best product available. I think if we can incorporate criteria into the sourcing systems, showing the eligibility is fine for the customer you’re looking at, it’ll help with a gap of knowledge and take away the bias some brokers have, for example, some not wanting to use a certain lender after having a bad experience previously with them. RB: Could criteria search systems integrate with sourcing systems? NF: There are conversations that are happening. There’s an inevitability about it. It’s fair to say it’s a natural progression. Up until 18 months ago when we launched everybody thought Excel was a great tool. We’ve come far. We didn’t start as a big company, just a broker with an idea who thought the industry could be better and there’s a chance to change it. What we’ve achieved in that time is fantastic but having said that that’s not where it stops. The lines have

NF: That’s why on our system we have a refer option, so they’re graded from a yes down to a no but lenders have a refer option. That’s the right thing to do, in the order of the ‘yes’ at the top and ‘no’ at the bottom, the refer sits above the no, so a lender can say yes in any form by an exception or a condition. A refer is better than a no, better for the lender, broker and customer. CC: It’d be far easier for lenders to have a clear black and white criteria but they’d be far fewer people getting mortgages so it’s much better to have those refer options, have a human being look at it and take a reasonable view and perhaps ask for more information and go from there. PB: The industry doesn’t want a yes and no. It needs to have this grey area. It’s not even manual underwriting, it’s pitching and packaging the case in the right way, so the lender sees the value in the case. RB: What did you make of the FCA’s plans to remove the detail required on firms’ execution-only policies and to change its rules to make it clear that tools which allow customers to search and filter available mortgages may not be giving advice? CC: I think sometimes consumers

Day 1 remortgage applications available on residential cases

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want to make contact because they seek clarification on something like ‘what does this mean or what does this say?’. You can go one way, saying any interaction with the customer talking about the mortgage should be treated as advice. I think the FCA is worried that perhaps it’s pushing too many people into an advised journey and clogging the system. There’s lots of borrowers particularly in the remo space who might know what they want and just want clarification and not a long conversation to get the rate they already saw online and want. I think it’s not encouraging more execution-only but whether consumers could be put off that they need to have advice all the time.

advised and that could go through the roof. That’s a big market that could potentially become nonadvised.

a certain order can influence where they go. RB: How much can you educate the consumer before it becomes advice?

RZ: I think they believe consumer journeys should be as flexible as possible to give the consumer the best outcome and don’t want a regulatory environment where lenders can’t offer what they feel is a more flexible journey. They don’t necessarily think lenders should offer advice but that in some cases the current regulation means the lender can’t say anything. If a lender had a PT portal able to show results and could filter by upfront fees, are humans needed for advice?

RZ: And who’d audit that and will say ‘on that day when they did the PT there were these options’. It’s harder to manage. Their intent is good, that consumer outcomes should not be restricted by regulation. PB: As a lender it’s their product and risk. If a lender offers a product transfer that’s execution-only I have no issue with that in the PT market and can’t see why you can’t do execution-only, because it’s convenient, it works, they’ve done the risk and underwriting, if it’s pound for pound remo, nothing’s really changing and the risk is minimal. I think though it opens up a floodgate over how certain things work. There’s an opportunity where the PT market will go over the £100bn-150bn mark and it’s just lending being recycled around. At the moment about 50% is non-

CC: When you show the results do you show the one with the lowest monthly payment or the lowest cost or randomise it? PB: Where does the line get drawn? ‘Here’s some guidance and I’ve probably influenced your decision’. There’s a fine line because putting something on the screen in

Help to Buy Equity clients can select a product from our standard range

VS: It’s on the back of the success of PTs over the last couple of years. I think these non-advised sales are a concern to some brokers, depending if they offer actual advice. I think the main risk is in terms of pricing and if dual pricing will come back. If a client could take a non-advised route and get a better rate than what they could do, potentially from an advised route, then we’re in a tricky situation and clients may almost be funneled down a non-advised route where they’re chasing the product. CC: MMR prevents you from doing that. There’s a piece which says you shouldn’t be incentivising customers to opt out of advice. VS: If there’s a piece that protects that then fantastic. I remember in 2009 and 2010 when dual pricing was around and that was awful. I’d prefer to have a conversation with someone just to safety net the recommendation if there’s no difference with the product. RB: How can advisers future proof themselves when dealing with customers going forward? Retention is very important right now given it’s very much a remortgage, product transferled market. RZ: Remortgages are back and the proportion of these that are product transfers are growing and of these execution-only is the trend. We’re talking about a different landscape for advisers where lenders will be able to do

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more with more product transfers and better online journeys direct to customers, and customers are taking out 5-year fixes. You have to understand the dynamics have changed and retention is a higher priority. Can you create a lifetime relationship with customers? Think about how many times they refinance. That’s a mentality shift and you have to relationship manage. What ways can you remind customers the adviser is always there? IFAs and pure GI insurance brokers do this very well. Mortgage brokers need to do that as well. PB: It’s not about sending an email once every two years and six months before the fix rate ends in an attempt to beat the lender. The lender will do it better and will remember to do it unlike a lot of brokers. This email won’t keep you this business. The chance you did a product transfer with them last year means you’ve probably lost business from that customer. RZ: It’s better than zero with execution-only. You should be having that conversation saying ‘you may stay with your existing lender but let’s talk about your options’.

VS: I think the mortgage broker role will be completely different. In five years’ time will there be a mortgage broker role or will it be a more financial adviser role? NF: It’s the relationship management. Every year don’t let customers’ general insurance renew, phone them and they’ll value that relationship. PB: The purpose of the adviser is to guide the customer. If you just do rate switching and product transfers there’s a place for you but if you’re not super-efficient you won’t be here. You need to specialise and be more of an IFA. If you turn away a customer over 55 because you don’t do later life lending you’re not going to be here in two years’ time. CC: If the market becomes more transparent on price alone it’ll become harder for the broker to charge a fee for product transfers because the customer could do it themselves online. PB: It amazes me how some brokers try to charge the full fee for doing product transfers. Certain

SC: I agree. I think the market is at significant crossroads and we’ll see some polarisation in the market over the next few years so I think technology will enable the big six high street lenders to do more business. There will be more execution-only and I see the intermediary market becoming more specilaised and brokers need to wake up and realise this. I’m referring to those transactional type of brokers who’ve survived on the two-year churn.

businesses do very well at servicing their customers but there’s 13,000 to 15,000 active in the market and we don’t need that many if the market continues down its route it’s heading. It doesn’t mean the market will contract, we’ll still get a £260bn, £270bn, £300bn market plus product transfers. There will not be as many advisers giving advice which means that everyone left has embraced tech and makes more money. RZ: That makes me a little nervous because that number should decrease in line with something replacing that advice. Does that number exist because consumers find it easier to deal with brokers rather than lenders? For those that need nurturing or education something needs to fill that space. If we see a dramatic decline in advisers does that correlate to a dramatic decline in the number of people getting advice? PB: My hope is it’s because everyone becomes more efficient. SC: We’ve found brokers who’ve been in the market for a long time and think digital advice and connectivity of technology will never catch on. And there’s this other group of brokers that see the benefit that it’ll allow them to connect with more potential clients and the millennial generation who will be coming through and wanting their mortgages on different devices. So, there’s a real shift that’s starting to happen and I think the technophobes will have to change. PB: Many have survived the crash, think GDPR is something that happened to others, still use paper, their interest rates are low, never 

Up to 90% LTV available for like-for-like remortgages

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Round-table

use a sourcing system because they think it’s all in their head and they earn quite a good living. In their minds they’ve always been covered by the grey areas of MCOP and I think this new paper will change their world massively.

RZ: That bonus is on us as providers and users to change the tone of the message. The way technology has entered this space is great, but it alienated and polisared this industry. We should all advocate it’s just gains. It’s not about who’s better or more modern. It’s you can offer a better customer experience, do more in less time, keep more of your customers and better validate what the right product for them is.

DC: When talking about how technology will change things many think that’s robo advice and removing advisers completely from the system, whereas actually technology can pose a bigger threat to those that ignore it through different ways. Clients will dictate how they want to communicate with advisers.

increasingly savvy about shopping around.

CC: We need to stop looking at it as a single face-to-face or single tech journey. It’s a combination of those things like starting online then speaking to someone later.

VS: It still comes back to they want the best deal. DB: Sometimes I get confused as to why people think technology means there’s no advice in the process. That’s not what it is. It can empower us to offer a more efficient journey and if you’re a customer centric firm it’ll never take away from the advice. If you treat customers well and use technology to empower you then I think you’ll last longer than other broker firms.

NF: I think robo advice is an unfortunate term and perhaps hasn’t helped. I liken it to the travel agency industry. You used to go in to a travel agent and book your holiday. Now you do the vanilla package holidays online and you’re more likely to sit down with someone for the bespoke holidays. I think we’ll see that reflected in our industry.

VS: Customers should be at the forefront of our minds. With the right technology brokers’ lives should be so much better.

VS: It depends on who you’re talking about in the market. First-time buyers should have to take advice. I think we have an older generation of clients who want that advice and relationship and it’s more the second and third time remortgagers that I think will be more comfortable going down a non-advised route.

PB: They should be embracing it and realise they’ll be saving time and seeing more customers, being more efficient. VS: And you get a much better end result with things being cross checked automatically and information being fed through correctly.

DC: But they want to shop around still. Customers have become

Contact your Barclays support team or visit barclays.co.uk/intermediaries for more details

CC: Technology could create huge efficiencies for compliance too. PB: Lots have said ‘don’t stand still, embrace tech’ but there’s no one voice on behalf of the lenders and on behalf of the behalf of the intermediaries for this industry. Everyone has their own views. There isn’t one consistent message back. I feel there needs to be a single voice going back to the regulator. NF: I think that would be great but if you come up with what’s the right thing for the customer how could you ever go wrong? If you go forward with the right thing for the customer, you’re on the right path. PB: There’s a value to customer needs. The value current customers and baby boomers have to advisers is not the same value that millennials and Generations Y and Z will have to advisers. Just because you serviced someone’s parents doesn’t mean their children will. They might want to do it on the phone. You have to embrace tech and adopt the route that suits your customers. If you don’t, you won’t be here. 

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Loan Introducer

Compliance ready or not Steve Walker, managing director of Promise Solutions, says seconds are STILL treated as a last resort option I read with interest last month’s Mortgage Introducer and especially Natalie Thomas’s excellent article which attempted to explain why second charges are no longer seen as being a “lending of last resort”. Some of the comments assured me that actually the opposite is true and whilst some of those interviewed had processes to deal with second charges, many clearly were of the view that a second charge still wasn’t really a consideration until a remortgage was off the table. I’d like to challenge this major misconception. Right now I am convinced there are thousands of brokers across the UK who use specialist lenders to place more complex first mortgages cases and think they are doing right by their customers – simply because a remortgage rate is lower than a second charge rate. To some people, what I am about to say will sound obvious to a blind, headless horseman riding a galloping steed through a snow storm at night. However three years after MCD maybe it isn’t obvious enough. A second charge at 4.9% can be cheaper than a remortgage at 2.9%. If brokers want to quickly identify when to consider a second charge there is a simple test they can to apply to every remortgage case. Is the customer capital raising and does the proposed new mortgage offer a higher rate than the current mortgage? Or do they have high ERC’s? If the answer is yes then surely there’s a duty of care to consider

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or compare a second charge in some way. This is highly simplistic but I think it needs to be simple to create the right habits. Why wouldn’t an effective broker check if it may work out cheaper to keep the current lower rate on the mortgage and use a secured loan or further advance to raise the extra capital? Let’s look at the maths on a hypothetical case. To make the maths easier to follow, assume the mortgage and any loan are both interest only. Your client wants to borrow an extra £50,000. They have a current mortgage of £250,000 at a rate of 2% – paying £416 per month. Their circumstances mean you can’t get the cheapest rates available so a new mortgage to raise the extra £50,000 would be at 2.9%. A deal at £300,000 at 2.9% would increase your payments to £725 per month. Alternatively they could borrow the extra £50,000 with a separate loan at say 4.9%. Whilst the rate on the loan is 2 % higher than remortgage rate, the blended rate across all the borrowings is lower and the repayments are lower too – as follows. Keep the existing mortgage of £250,000 at 2% – pay £416 per month. Borrow an extra £50,000 separately at 4.9% – pay £204 per month. The total monthly payments on the existing mortgage and new loan are £620 – that’s £105 per month cheaper than the remortgage and assuming a 20-year payback a saving of over £25,000. The numbers are for example MAY 2019

purposes but the principles are undeniable. Why is this difficult to grasp? The truth is that it isn’t but theory and practice are two different things. What is difficult is getting two reliable quotes so a fair comparison can be made. Your standard sourcing systems are not going to handle it – they will be wrong more often than they are right. If brokers have gone through this experience it’s no surprise that they don’t want to repeat it. So what do brokers want from second charges? I think they want to provide the basic information, explain any complexities, and get a written comparison quote they can rely on from the whole second charge market. Most of the time they want to do it over the phone, discuss it with an experienced underwriter and know within a few minutes if they can rule a second charge in or out. And if after that conversation they want to run with a second charge, they want the same person to deliver what they promised. And that’s exactly what the best second charge packagers will offer. A second charge won’t be suitable every time but I think we are kidding ourselves if we believe that a significant part of the mortgage industry don’t still treat second charges as a last resort. If your client is capital raising and the remortgage rate is higher than the current mortgage, are you happy how your compliance file explains why that client wasn’t offered a second charge but the next client who you couldn’t help was offered one?

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It Mast be love Loan Introducer catches up with Jon Sturgess, head of sales at Masthaven Bank, to discuss the growth of the market, education and what the future has instore for the seconds industry Offering both first and second charge mortgage products, Masthaven Bank benefits from insight into both sides of the mortgage tracks. Last year it launched its products through Legal & General Mortgage Club in a bid to further expand its second charge reach to first-charge brokers.

You launched your second charge mortgage range through Legal & General Mortgage Club last year, how has that gone?

One of the toughest things, not just for ourselves but for all second charge lenders, is educating mortgage brokers to start looking at seconds. It’s a long haul and getting in front of them and presenting is not necessarily the easiest way as there are so many. From our perspective, the market needs a lot more brokers to use second charges and that is predominately down to the networks and the clubs. For us we have a slight advantage as we also have a first charge proposition, so we already have a relationship with mortgage brokers on one side of the fence and we can also talk to them about seconds in some instances.

What do you feel are some of the stumbling blocks to mortgage brokers offering second charge mortgages? We speak at roadshows and a lot of brokers are still not aware

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of what you can use a second charge for. For some brokers it is just a lack of desire to do seconds because they are new to them and something they have not done in the past.

Do you think the second charge market has the potential to grow further in terms of volume?

We see growth in the second charge market that’s for sure. Lending was around £1.1bn last year according to the Finance & Leasing Association and if we can get that up to £1.3bn then that will be a sizeable improvement. The more brokers we can get in front of over the next two years to help better understand second charges, the more the market will increase. Brexit will potentially impact the market but there is a type of customer out there at the moment who is not moving but improving; and that’s quite good for the market as a lot of borrowers are in long-term fixes and will be looking to raise funds.

What would your advice be to any mortgage broker not currently offering second charges? Talk to lenders, look on their websites and pick the phone up and try to understand the market and what we can do for you. Don’t automatically think it’s going to be difficult because if you already arrange first charges, the two aren’t dissimilar.

What products are you seeing demand for?

We are seeing a push for fixed rates because people want MAY 2019

certainty of payment, especially with debt consolidation. Fixed products in the seconds market very rarely have an Early Repayment Charge (ERC) so it gives the client the ability to move if they need to. Rates are around 3.5% at the moment and I don’t see them necessarily coming down to 2% because of the costs of funds etc. I think where we are at is probably more than reasonable for the risk that we take.

What is the biggest challenge currently facing the sector?

One of the biggest challenges from a lender perspective is around product diversity and what products we can bring to market which may enhance the opportunity for brokers to come to us. This perhaps involves looking at the first-charge market and the products there and seeing if there is anything that we can also bring into the second charge world.

Do you expect more new entrants into the sector?

From the lender side, we are not aware of any – the market is congested to a degree around the prime area. Near-prime isn’t as congested but obviously there aren’t as many consumers in that market as there used to be. We are not expecting anybody to come in and make a big bang. On the specialist packager side, there is always a possibility that we will see someone new but we are not expecting to see somebody launch with a huge workforce of introducers. MORTGAGE INTRODUCER

Loan Introducer

Brexit Schmexit

Until a clear way forward for Brexit has been forged, political and economic uncertainty continue to linger over the UK. Natalie Thomas asks the questions

The UK’s divorce from the European Union has arguably already created in its fair share of winners and losers in the world of politics and business but can the same also be said of the housing and mortgage market? Figures from UK Finance show that homemover mortgages increased by just 0.1% year-on-year in February. First-time buyers fared better, seeing a 4.1% annual increase and remortgages with additional borrowing a 10% yearly increase. However quite differently, according to figures from the Finance & Leasing Association, the second charge sector saw a 24% annual increase in loan agreements during February, with 2,163 new agreements agreed during this time – the strongest rate of new business volumes growth the sector has seen since May 2017. The value of new second charge business was also up 20% at £98m, compared to February 2018. Speaking about the figures, Fiona Hoyle, head of consumer and mortgage finance at the FLA, says: “The popularity of second charge mortgages continues to grow as people opt to improve, rather than move.” So, could it be that the mortgage market’s loss is the second charge sector’s gain? Loan Introducer asks: “What products do you think would help propel the market further?

Jeff Davidson, head of intermediaries at Fluent for Advisers We could all have done without the uncertainty Brexit has caused but we have seen a significant interest in applications from borrowers for home improvement second charge mortgages.

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Customers seem very comfortable with this means of extracting equity to pay for home upgrades, rather than move. Our sister business Fluent Mortgages has also seen a jump in remortgage applications.

Steve Walker, managing director, Promise Solutions I can’t point to any evidence but anecdotally many mortgage brokers say they are quieter and quote indecision over Brexit which is likely to impact on second charges generated through the broker to broker channel. On the other hand, it has been well publicised recently that Brexit is holding back house moves and people are choosing to stay put and improve their existing home. As brokers are not good at promoting their ability to arrange loans any upturn in second charges this causes is likely to play in to the hands of the online comparison sites and the second charge firms they partner with. The smart brokers will tell their clients they can arrange home improvement loans and recover this lost business which will either go down the remortgage route or via a second charge.

Mike Walters, head of sales – mortgages and bridging, United Trust Bank Although Brexit has created uncertainty amongst consumers and businesses, it’s hard to say whether it has had any direct impact on the second charge market. From a UTB perspective, the last three years have been a period of significant growth but if anything, I’d say Brexit is more likely to have been a positive than a negative. The uncertainty

Brexit has caused may have prompted some consumer behaviours which have boosted remortgage and further advance business as well as increased activity in seconds. For example, a good percentage of loan purposes for all of these products will have been for home improvements and debt consolidation. Borrowers are looking to improve what they have rather than move and many also wish to lower their monthly outgoings, possibly preparing for what they see as economic uncertainty ahead.

Jo Breeden, managing director, Crystal Specialist Finance The uncertainty has meant the number of homemovers is in decline year on year from our experience and what we have seen internally is people looking to home improvement, no doubt. From our own figures I’m not sure we have seen a rise year-on-year for debt consolidation yet and if you look at the consumer credit figures I think, if anything, people are borrowing a little bit more on credit cards etc than they were last year. We are definitely seeing people enhancing the security in their own homes more now than we did last year, which I think is probably due to the macroeconomic environment. Why would you want to move house right now? I know I certainly wouldn’t but I’m certainly thinking about putting an extension on and I think consumers have followed that trait completely.

Alistair Ewing, managing director, the Lending Channel: According to our mortgage broker introducers there

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definitely seems to be a lack of new housing stock coming onto the sales market due to political uncertainty. Our own second charge figures for the first four months of the year reflect a near 20% rise in unit transactions, which seems to be mirroring the wider market. While we are unable to accurately report what proportion of these loans are for home improvements, this increase would seem to suggest that people are more inclined to stay put for now.

Paul McGonigle, chief executive, Positive Lending The overall uncertainty has driven an increase in second charge business I believe. Clients mention to our advisers that the uncertainty is a concern to them but I would not say that this is the only reason that we have seen an uplift in seconds. I think that the potential for a Bank of England base rate hike or two in the next 12 months also plays on customer’s and intermediaries’ minds. With borrower uncertainty, we are seeing a lot of consolidation of credit at the moment and a gearing towards 5-year fixed rates.

Darren Perry, head of second charge mortgages, Brightstar The Brexit uncertainty appears to have been good for business, yes. It’s no secret that property prices have taken a bit of a hit. Some areas are stable but other areas such as London have actually gone down and we are also seeing this in the valuation reports coming back to us. More and more surveyors are airing on the side of caution to future proof themselves, due to fear of over overvaluing a property. The last thing they want is someone coming back to them saying they have overvalued their property and put them in a delicate situation. So clients are in a position where they are questioning whether they wish to sell at this moment in time, possibly getting less for it or take on a higher LTV loan. So, what they are looking at doing is improving their own home. A second charge can be a fix in a lot of scenarios and where people don’t have confidence in the property market but have a growing family and need more room, they are saying look, we will stay put and improve and make it nicer for ourselves. Or it could be that maybe they don’t want as much debt around their necks. First charge lenders are a little more reluctant to lend for debt consolidation purposes these days but we are seeing borrowers who are looking to consolidate their debt now until their next opportunity to remortgage because the first-charge mortgage lenders are a little happier to remortgage and roll a first and second together as opposed to putting a first mortgage alongside a lot of credit card debt and loans. So yes, I think the uncertainty around Brexit has stimulated the market.

Damian Cain, director, Complete FS We have seen a steady increase in second charge business over the past two years. Certainly, we have been successful in attracting more first-time introducers, which suggests that it has more to do with better education among brokers about the benefits of a second charge loan in certain cases than the effects of Brexit. Our choice of fee packages has also been a factor because introducers can now control the level of fee charged to suit their client’s circumstances.

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MAY 2019

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Loan Introducer Cover

The Vorderman Is there a benefit to be had from re-educating consumers about the benefits of a second charge? Natalie Thomas reports There was a time when it seemed you could not switch on your television without Carol Vorderman leaping forth, telling us how easy it was to apply for a Firstplus loan. Regardless of your view on the ads, they did achieve one thing – and that was to raise awareness of the second charge market to consumers. Much of the effort so far around market education has been focussed on mortgage intermediaries but is there some benefit to be had from re-educating consumers about the benefits of a second charge? Or should the focus remain predominantly on breaking down barriers between the sector and the first charge mortgage market?

TV Marketing

“Firstplus were not the only lender marketing on TV: Picture and Nemo did the same,” says Paul McGonigle, chief executive at Positive Lending. “And large brokers too – I remember Ocean TV for example – a 24 hour TV channel promoting the product. But in those days the income from second charge lending was between 250% and 500% of the income you earn today, plus you had the options of selling Payment Protection Insurance, so the TV budgets were viable. “Education is always a good thing but I don’t think that lenders and mainstream brokers can afford to,” he says. McGonigle believes if second charges were to get exposure through TV advertising today, it is more likely to come from “a meerkat

or opera singer”, as opposed to an actual second charge firm. Steve Walker, managing director of Promise Solutions agrees that firms in the sector no longer have the budget for such campaigns. “Consumer education is very important but the economics of the industry at the moment make it very unlikely that anyone will pump the multi millions needed to fund that scale of campaign,” he says. He also believes that an advert such as Firstplus’s debt consolidation one for example, would need to be clearer and display prominent warnings if on TV today, due to advertising requirements. This he says would make such an ad “far less attractive and cost effective.” Even if lenders or broker firms did have the deep pockets needed to fund a campaign, they might not necessarily have the capacity to deal with the volume of enquiries which it would generate, says Tony Marshall, managing director at Equifinance. “Consumer knowledge of the product is not what it could be and could be improved greatly by increased marketing spend,” he says. “However, as we all know consumer advertising doesn’t come cheap, there are significant risks for a lender to operate this strategy and neither do all lenders have the capacity, resource or desire to attract and deal with business acquisition direct to consumer. It’s an ongoing dilemma for all of us,” he says. Is a TV campaign necessarily needed to educate consumers in today’s internet-led society though? Jeff Davidson, head of intermediaries at Fluent for Advisers, believes not. “We tend to underestimate the public,” he says. “When the average person in the street wishes to find the best way to finance a capital raising exercise, they will tend to go straight to the internet and will be better informed about the choices available than previous generations,” he says. “Then it is a case of seeking advice from a broker who can help them decide on the best course of action,” he adds. Alistair Ewing, managing director of the

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effect Lending Channel believes the industry as a whole could do much more to raise consumer awareness. “Clients are not typically asking to borrow money using a second charge but rather are falling into our market by default when a mortgage or unsecured loan doesn’t go to plan,” he says. “Any form of mass direct consumer advertising would certainly help, but of course this would come at substantial cost for participants and is clearly a higher risk than the aggregator/introducer relationship type strategy that tends to drive the bulk of the volume currently,” he says.

First impressions

Darren Perry, head of second charge mortgages at Brightstar, takes a similar view and believes consumers know a little more than we perhaps give them credit for. He believes the problem does not lay in educating consumers as to what second charges are but rather what they can be used for. “The popular misconception is that second charge is for bad credit,” he says. “So, I think the education needs to be focussed on not just what the product itself is but what it can be used for and the rates available. We’ve seen rates as low as 2.09%, which a borrower or broker might not have assumed were available for a second charge,” he says. “I think borrowers probably also don’t understand that they are afforded all of the same protections on a second charge as they are on a first charge with the Financial Conduct Authority being the regulator.” Jo Breeden, managing director of Crystal Specialist Finance, believes unless mortgage brokers properly understand seconds, they will not be able to educate borrowers if asked about one. “Even if you did educate consumers, a broker wouldn’t necessarily have the right response when questioned about a second,” he says. He believes it is down to the regulator, networks, clubs, packagers and lenders

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to work together to ensure the second charge market has a voice that is heard. “First and foremost I think it comes from the regulator,” he says. “CeMAP is the required mortgage qualification but it does not have a second charge syllabus in there: why not? You can’t expect mortgage brokers to be educated about seconds when the exams they are sitting don’t have it in there – for me that’s where it has to begin,” he says. Another packager, who did not wish to be named, also felt the regulator could do more in terms of the information is displays on its affiliated site, the Money Advice Service. The site has a section entitled ‘When not to use a second mortgage’. Under the heading it advises not to get a second charge ‘if you’re already only just managing to repay your mortgage’ or ‘if you want to consolidate debts.’ Yet, the packager argues that a second charge might be a good option in both these scenarios. If for example a borrower’s unsecured credit was stopping them paying their mortgage and affecting their affordability, a consolidation loan might be exactly what the borrower needs to avoid arrears. While a borrower looking to consolidate debt might benefit from a second charge if they borrow at a low interest rate over a short period of time. This, the packager says, might help clear their debt. “Many consumers are stuck with unsecured credit at 20% and can only make the minimum payment – they are not reducing the debt so it could continue forever,” he says. “Even if we all do our bit to promote consumer awareness, it’s a tough nut to crack when the so called experts regurgitate standard warnings without any understanding or consideration of individual’s circumstances. “Surely the advice should be to speak to a qualified adviser to see if a second charge might be suitable rather than only drawing attention to what could go wrong? How is that clear fair and not misleading?” he adds.

Building broker bridges

Despite the best efforts of firms in the second charge market, there are limits to what they can achieve on their own. McGonigle says its national field team attend nearly 3,000 meetings per annum and second charges are a large part of

their education programme. “However, we are realists too – we understand that the market represents less than 0.5% of the mainstream market in terms of lending,” he says. “Brokers may not always think about the options of second charge lending, considering it to be expensive or dare I say a bit controversial in terms of practices. However, that is not the market at all. It is regulated in the same way as mortgages. If anything, in my opinion, second charge lenders are over-cautious at present as they know that they are under the spotlight of the regulator and pricing has never been better in the 27 years that I have been in the market,” he asserts. Davidson agrees that firms in the sector can only do so much. “There is the old saying: ‘You can lead a horse to water but you can’t make it drink.’ At Fluent we have prioritised education and training and will continue to do so. However, having presented the facts, advisers need to be free to decide where and when they wish to consider a second charge mortgage. “The number of ‘new to second charge’ advisers continues to grow, but in the end, the broker is there to make the recommendation. It is their call,” he says. Marshall believes the sector still needs to get to the root of understanding what brokers want to know and why they might not see the benefits of second charge loans. “We need to deliver to them products, solutions and information they are interested in, so that they become comfortable with second charge loans as an alternative,” he says. Budget constraints mean the days of Carol Vorderman, or indeed anyone, advertising second charges on TV appear to be over – for now at least. The biggest challenge the sector faces is still conveying its merits to an, at times, disengaged first-charge market. The process of education is a slow one but the sector seems to be moving in the right direction, with the latest figures from the Finance & Leasing Association showing a 19% increase in applications year-on-year in February. As Perry highlights: “If we do the job properly that creates the opportunity for people to talk about it with their friends and family and I think that is the greatest advert you can ever have.” MAY 2019

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SFI: P2P

The attractive entry point into property investment For investors the current turbulent economic environment has made the trade-off between risk and return somewhat more challenging that it has been for a few years. Volatility in the equity markets at the end of last year saw stocks ricochet from record highs to post their biggest fall since 2008 – with the FTSE100 ending down 12.5% at the end of December 2018. And while stocks bounced back in the first quarter, many are understandably wary. In such a climate, it’s not surprising that investors are turning to asset classes that might be considered somewhat more stable such as property or bonds. Yet buying property remains expensive and buy-to-let investment is a far less attractive option than it once was. This is where P2P lending platforms may offer a solution. Less costly than buy-to-let investment, I believe P2P property platforms provide the perfect entry into bricks and mortar investment while offering highly attractive returns.

Roxana MohammadianMolina chief strategy officer, BLEND Network

Buy-to-let pressure

Traditional routes into property investment are being squeezed as never before. The stamp duty surcharge on additional properties introduced in 2016 has made investing in a buy-tolet portfolio more expensive. Meanwhile, some landlords now face an uphill battle getting mortgages at all, thanks to tighter lending restrictions ushered in by the Prudential Regulation Authority at the start of 2017. And this month sees another tranche of mortgage interest tax relief disappear driving up costs once more for buy-to-let investors. All of this has led to an 80% fall in new lending on buy-to-let properties in two years from £25bn to just £5bn. As a result, many investors spooked by the volatility in the equity markets and put off by the cost and increasing administration asso-

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MAY 2019

ciated with buy-to-let investing have begun to look to alternatives such as P2P lending . In their simplest form, P2P platforms connect those with money to invest with those looking to borrow, enabling investors to target solid returns without the rollercoaster volatility of the stock market, while benefiting from reduced transaction costs. Additionally, P2P performance has proven to be robust with many of the largest P2P lenders delivering yields of around 4-5%. In 2015, P2P was approved to be included within the ISA wrapper, so interest earned through eligible P2P platforms can now be tax-free. The rise of P2P, together with a decade of low interest rates has inspired many would-be savers to seek alternatives to traditional banks saving accounts to boost their income. Lending is robust too. Last year, P2P lending volumes stood at £3bn, according to figures compiled the UK P2P Finance Association (P2PFA), while P2P lending to date now stands at £15bn and within this property-based P2P lending, in particular, is experiencing healthy demand .

Routes into P2P

Property-backed P2P lending has become increasingly popular with

investors because the loans are secured against bricks and mortar, reducing risk of capital loss, yet maintaining the healthy returns on offer. There are two main ways to invest in property through a P2P lender. The first, property crowdfunding is possibly the most familiar. It allows investors a fractional share of a property along with others over a lengthy period of time. Investors stand to make a profit as a property’s value rises over time, along with a share of potential profits from rent (which could be thought of as similar to a stock’s dividend). Of course, ownership also carries the risk of losses if property values drop, if there are void periods and owning a fraction of a property if things go wrong can create headaches in terms of determining the order in which multiple investors should be compensated. Considered a simpler method, P2P property lenders advance money to property developers to either build small developments or refurbish old buildings into residential accommodation. The loans are for far shorter periods, so investors lose the potential for a windfall return on the longerterm investment in a buy-to-let property that is gaining in value each year. But the returns are generally more predictable and in some cases the investor, or some P2P platforms such as Blend Network, have the first charge on the loan should anything go wrong, meaning the risk of significant losses is relatively small.

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SFI: Bridging

Finding trust in bridging Apex was established five years ago. I was working for our sister company, House Buyer Bureau, a property cash buying firm and we quickly realised the property trading experience allowed us to set up Apex Bridging a little differently, looking for reasons to lend, rather than reasons not to. Driven by people who care, not by computers who reject. Lenders must understand the full picture on every deal, finding solutions instead of hiding behind ‘criteria’, not all do. In those five years I believe I have learned a great deal about how to build trust and how that trust with all your stakeholder partners must be the foundation of all your relationships enabling you to build for growth. Trust for all lenders starts with their own staff. We cannot expect external contacts to trust us if we do not trust our own staff and they

Sonia Shortland director, Apex Bridging

in return must trust in the business proposition designed by the management team. I am a firm believer that growth will not be delivered if the internal team of a lender and to be fair, for all their stakeholder partners, do not trust the model they have to work with. At Apex Bridging we have taken the decision to go for a more aggressive growth programme in 2019 and at the core of our improving proposition is an education programme that we will be launching initially internally that will give us the confidence for us to promote our distribution model to a select number of brokers and developers who are kindred spirits and return the trust we are striving to embed in the Apex Bridging proposition. The bridging sector continues to clamber for more training programmes so we can finally kill off the reputation the sector once had

A different sort of bridge In good times or bad, markets demand change; nowhere is that more so than in the highly competitive, bridging loan market. Lenders have choices; reduce interest rates until there is no purpose being in business, extend LTVs until losses are certain or just be commercially competitive and innovate. Transformation comes in a number of ways. First systems, secondly breadth of offer and finally new products to cover a wide range of circumstances. Initially lenders only offered nonregulated loans and then some widened their offer to include regulated bridging loans for owner-occupiers. But innovation has not ended here, and the market now also embraces development finance, term loans and even overdrafts. Keeping it simple but being innovative is almost a contradiction of terms. However, that we must all www.mortgageintroducer.com

do and particularly for small loans, systems need to be adapted to enable loans to be completed quickly and simply by using panel valuers and title insurance with dedicated case management and streamlined underwriting. Both brokers and borrowers need to understand the offer and be able to identify the advantages. It is not just a case of headline terms – interest rate, LTV and arrangement fee. The Alternative Overdraft recently introduced by Borehamwood based lender, Alternative Bridging Corporation, demonstrates this and enables the borrower to drawdown, repay and then drawdown and repay again and again, whenever the need arises. How much better it is to avoid paying interest when the loan is not needed and to avoid setting up costs each time it is. Whereas most bridging loans are for up to 12 months,

Brian Rubins executive chairman, Alternative Bridging Corporation

for being the provider of last resort with rates that were exorbitant. Trust is not profiled enough as the core element of many lenders proposition, many focus on transparency, flexibility, rates and even speed, all these are essential depending on the individual lender’s definition, but without trust, repeat and referral business will not be generated. It is great to see that more lenders are asking their stakeholders what they require of them to trust in a lender that they will not move the goal posts, will be consistent in their decision making and most importantly will educate all their staff in what is expected of them by their distribution partners to ensure the individual lender benefits. At home I am a mother of two fabulous boys and all I have ever done since they were born is build their trust in their mum. I look forward to more lenders having trust at the core of their model as the competition for business grows. the ALTERNATIVE Overdraft is for up to two years and may well be extended at the end of the period. The arrangement suits both property investors and the business community. A recent development for a few bridging lenders is to offer a long, long bridge, in fact a term loan for up to five years, available with speed and simplicity of underwriting. These loans, which do not require capital repayments during the term, sometimes need views to be taken on the borrower’s ability to service interest. Here the lender can provide a bridge which converts to a term loan or can commit immediately to it. By meeting the borrower, lenders more easily understand the business plan and where it appears initially there will be a problem servicing interest, a period of accrual can be incorporated. This suits a wide-range of investment properties and business owner-occupiers. These are some of the different kinds of bridging loans with innovation for brokers to embrace and pass on to their clients.

MAY 2019 MORTGAGE INTRODUCER

SFI: Standards Bridging

Going the extra mile This month we have returned to one of the subjects that really sits behind the FIBA brand and that is for us to continue to raise standards and professionalism in our Industry. I want to pose some questions and highlight a number of areas, which I think are going to be important in the coming year and have already featured strongly in some of the events we have run in 2019.

Adam Tyler executive chairman, FIBA

Practical outcomes

We have now hosted four joint trade body meetings with ASTL, which also brought together our members, lender partners, our professional partners and other industry service providers. This is far from a talking shop and the practical outcomes are already being seen because of these industry forums. This is not an area of finance that has sought standardisation, whether in terms of the information that lenders require from introducing brokers, through to making it easy to place business with bridging and development lenders on a simple sourcing tool. However, we can help make it sim-

pler and easier for lenders to assess an initial enquiry, for our members to be able to make their way through the full range of lenders and even for a solicitor unfamiliar with our world to be assisted independently at the outset by Industry experts. For example, one debate centred on the minimum amount of information that would allow a lender to give an in principle agreement subject to the necessary verification. But at this point, as there was so much variation in requirements between lenders, we knew that we could not expect uniformity, but education and awareness will help everyone and we can return to this topic in the future.

Regionalised forums

As a result of the success of these London meetings, at FIBA we want to regionalise these forums. We will begin in Manchester in April, followed by Leeds in May, then Glasgow, Birmingham and Cardiff. We have of course scheduled another two in for the capital in conjunction with our colleagues at the ASTL.

Women mean Business proportion of funding going to women Even after all my years in the commercial was 7% of the total. lending market, I was shocked by the So regardless of the massive increase Treasury’s own findings that female in funding sources since that time, the entrepreneurs receive on average 157 actual proportion going times less funding than to female start ups and businesses run by men. other businesses has In stark terms, male only “FIBA is going to get tanked.I am not going businesses received behind the campaign to use this article to go over £5 bn last year through the reasons, in funding, while the to help more women because the figures are sum afforded to female entrepreneurs” damning enough on their led businesses was a own without searching meagre £32 million. for the whys and wherefores. Suffice For every £1 of venture capital to say, that FIBA is going to get behind investment, less than a penny goes to the campaign to improve the situation all female teams according to the British and help more women entrepreneurs Business Bank. and business leaders to fund their A slight imbalance to say the least. businesses. Watch this space. What is worse, 10 years ago the overall

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Underwriting issues Not a week goes past without a new bridging lender coming to market and if you add in the growing number of commercial lenders entering the sector, as brokers and indeed our customers have never had it so good. Yet, there is always a ying to go with the yang in any situation and while the proliferation of lending sources is a cause for celebration, there is a growing underlying worry.

Next generation

As far as I know, there is no seat of learning dedicated to the art of underwriting, no conveyor belt of newly minted and eager young underwriters, ready to fill the increasing demand for what is a very underrated talent. Where is the next generation of underwriters coming from? There is only so much poaching and moving that can be done and I know that an experienced underwriter is worth his or her “weight in gold” at the moment. As an industry, lenders will have to look carefully at the available talent they currently have and the amount of work they are going to have to put into ensuring that the next generation is up to the task of making good consistent decisions. Therefore, what can we all do now to help and in returning to an earlier topic above, how can this be combined with ensuring the information at the point of entry from the broker community meets the standards required? This is the subject of a long running debate and as was pointed out to me yesterday by a truly imminent industry figure at our lender committee meeting, the two of us have been talking about this for 15 years. There is a lot to be said about ongoing training and education or as we should call it Continuing Professional Development, and this has to be a consideration in the education debate. www.mortgageintroducer.com

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Matt Bond matt@mortgageintroducer.com 07525 456 869 Francesca Ramsey francesca@mortgageintroducer.com 0203 883 9017

www.ssawards.co.uk FRIDAY 28 JUNE 2019 MADISON ROOFTOP ST PAULâ&#x20AC;&#x2122;S | LONDON

The Last Word

What an opportunity Jeremy Duncombe, director of intermediary distribution at Accord Mortgages says opportunity knocks for the industry In a year which has been dominated by uncertainty and speculation, it would be easy to forget the steps taken in our industry to keep the market buoyant. Continual innovation to reflect the changing needs of borrowers means there are plenty of lending options. But increased choice brings confusion and with the media fuelling constant negativity around Brexit, there has never been a more opportune moment for brokers to provide practical and impartial guidance on navigating finances to ensure the greatest benefit.

negating the need for any human interaction. But, as we all know, even the most effective robots cannot provide the empathy and reassurance that the majority of borrowers crave when making a decision on their biggest asset. Consumers are timepoor and have high expectations of good service. And with even more products to choose from it can be difficult even for financially savvy borrowers to navigate. Those with specific needs are even more likely to require a broker’s help.

The property market

Opportunity

The housing market has been remarkably resilient, but continues with the imbalance of supply and demand. There are not enough properties for the people who need them, most notably a lack of suitable homes for older people looking to release equity or downsize, and first-time buyers struggling to get on the housing ladder. The market has responded with new products and adjustments to existing criteria. The introduction of our Help to Buy and new build products in September last year was a direct result of broker feedback. Advisers wanted a greater choice, so we focussed on creating a specialist solution to what can often be a problematic set of criteria for brokers. Following a successful launch, we remain committed to evolving this offering further.

The ‘new’ normal

What’s more, we’re noticing even more complexity in the lending space. There are few ‘standard’ house buyers anymore. The world is a diverse place and people have different demands on their lives which don’t fit neatly into a rigid mortgage application. We’ve made it our focus to change how we look at cases and evolved our approach to ‘principle based lending’ or, put more simply, ‘common sense lending’. In

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Jeremy Duncombe

other words we’ll try and find a way to lend where it makes sense.

Digitalisation

Whilst technological advancement is nothing new to financial services, the last 12 months has perhaps seen some of the biggest changes in recent times. The astronomical growth of fintech, the rise of challenger banks and the drive towards successful open banking has dramatically changed the environment we work in. If embraced, digitalisation can really enhance a broker’s business, streamlining processes to reduce admin and increase productivity. There are obvious considerations such as how to balance investment into new systems with the perceived benefit, but using inexpensive tools such as a customer relationship management system is a simple way of maintaining client engagement to help retention and referrals.Whilst the increase in automation and robots brings plenty of opportunity, it’s understandable that some brokers may feel threatened by these changes, as new tools could jeopardise their very existence. Borrowers can theoretically research, select, apply and get approval for mortgages through their smart phones,

It is imperative that lenders work with brokers, ensuring two-way communication enabling the market to adapt to the ever-changing needs of clients. Whilst technology definitely has a part to play, nothing can replace speaking with brokers, asking the right questions and responding to feedback. This engagement is at the core of our business model. The Accord Growth Series launched last April offering brokers materials to grow their businesses. More than 3,500 brokers have signed up within the first year and have free access to more than 50 free tools, guides and other support material worth the equivalent of £25,000, in addition to podcasts and blogs from industry leaders.

2020

In the next 12 months, I see the market adapting even further, with greater innovation in intergenerational lending, later life lending and constant changes in criteria to reflect our ever-changing society. Whilst there will undoubtedly be more uncertainty in Westminster, what we can be sure of is that people will still want to own their own home and they will still need financial support to do so. What we can impact is the simplicity of this process with the best advice, the best products and the best possible service.

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The Hall of Fame

Everest charity triumph

Meet Leek United’s very own Jeanette Pickup. Customer assistant Jeanette has just returned from a trek to reach Everest Base Camp to raise money for the Acute Stroke Unit at the Royal Stoke University Hospital after she suffered a serious stroke at her home in 2016. She climbed up to seven hours a day and reached an altitude of 5,364 metres. Jeanette hopes to raise around £4,500 via her Virgin Moneygiving page so go on, support the cause and take a look. Jeanette, The HoF salutes you.

It’s all kicking off (again)

Red Carpet Treatment…

Seven Port Challenge charity ride As the summer months approach, more of us are dusting off the cobwebs from our bikes and getting out to enjoy some pedalling (we’re looking at our very own Felix Blakeston who recently invested in a new bike and full lycra wardrobe to enjoy in the sunshine). However this month’s Red Carpet is in honour of those who are entering the Seven Port Challenge charity cycle ride to support four different charities: Martlet’s Hospice, Off The Fence, The Grace Eyre Foundation and Rockinghorse. During the May Spring Bank Holiday and organised by the Brighton & Hove Property Consortium, local property professionals in Brighton & Hove will be setting off from the British Airways i360 and cycling to Portsmouth, then hopping on a ferry to France and cycling along the Normandy coast. The trip is set to take three days and 180 miles all in the name of charidee. The team are over halfway with their fundraising target of £50,000 so make sure to visit their Go Fund Me page to find out more. Well done all, The HoF salutes you.

The team at Leek United get another mention, as they kick off for a game of footy against a team from The Donna Louise Hospice for Children and Young People in Stoke-on-Trent at Stoke City FC’s bet365 Stadium this month. The friendly is one of a series of events that the Leek United staff have got planned this year to help the Donna Louise. Tickets are available at the gate and cost £3 for adults and £1 for children with all of the proceeds going to the cause. The last time the teams met in 2018, Leek United ended the game with a 3-0 victory, so who knows this year? They’re a charitable bunch at Leek United so make sure to show your support.

The richest of the rich

Sunday 12 May marked the release of The Sunday Times Rich List, and we spotted a few names you might recognise. Masthaven Bank funders Mark Pears came 45th this year, and Moneysupermarket. com founder Simon Nixon came 110th with a fortune of £1.365bn. Right at the top of the list were the Reuben brothers, David and Simon who came second with an eye-watering fortune of £18.664bn. Sir David and Sir Frederick Barclay also featured in a cosy 17th place. Nice work if you can get it.

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