Mortgage Introducer – May 2021 by mortgageintroducer

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INTRODUCER www.mortgageintroducer.com

May 2021

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 Robert Sinclair  The Outlaw  Loan Introducer

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EDITORIAL

COMMENT

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Will the end of government support take heat out of the market?

o you ever stop and think about what has happened over the past 14 months? It’s easy to just get on with it and not think too much about the madness - especially when you are as busy as those in the mortgage market have been over that period. The government made it clear that supporting the property market was a priority. Clearly that has worked, and house prices are surging ahead. The latest figures from Halifax show an 8.2% annual growth in house prices since April 2020. Not bad going at all. But it could be argued that the property market is seeing the intial signs of overheating. The lack of available properties, rising prices and high demand are making it increasingly diﬃcult for those looking to buy. Asking prices in the South East are rising at a rapid rate, and many

properties are arguably overpriced. When the stamp duty holiday and furlough come to end, will that mean that the market will start to cool? That remains to be seen. The government needs to ensure that the balance is reached to achieve a strong, accessible property market whilst ensuring that the country avoids any overheating. However, there could be another factor that keeps heat in the market. The Bank of England (BoE) has upgraded its growth forecast for the COVID-hit economy. Its quarterly Monetary Policy Report said that the recovery, fuelled by the vaccination scheme, was clearly under way at a greater speed than initially expected. The bank said it now saw growth of 7.25% during 2021, which would be the strongest since 1941. That may mean that any cooling of the market will only be short-lived.

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MAY 2021

MORTGAGE INTRODUCER

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MAGAZINE

WHAT’S INSIDE

Contents 7 AMI Review 9 Market Review 14 Green Mortgages Review 15 London Review 16 High Net Worth Review 18 Recruitment Review 19 First-time Buyer Review 20 Technology Review 22 Lending Review 23 Buy-to-let Review 30 Protection Review 37 General Insurance Review 39 Equity Release Review 44 Conveyancing Review 46 The Outlaw The latest from our resident outlaw 50 Interview: Join our club... Mortgage Introducer speaks to Paul Lewis, managing director of the newly launched TMG Mortgage Club

THE OUTLAW

50 INTERVIEW: TMG

INTERVIEW: PAUL LEWIS

52 Cover: Diversity and inclusivity round-table Our latest round-table asks if commitments to diversity and inclusion in the mortgage market are rhetoric or reality

58 Loan Introducer The latest from the second charge market 62 Specialist Finance Introducer Specialist finance reviews and interview 66 Spotlight: Mike Mikunda Why events still count post-COVID

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LOAN INTRODUCER

ROUND TABLE: DIVERSITY AND INCLUSIVITY

MAY 2021 MORTGAGE INTRODUCER

REVIEW

AMI

I want some more Xxxxxxxxxx Robert Sinclair chief executive oﬃcer, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx AMI

he latest Financial Conduct Authority (FCA) fees consultation is the first tangible sign we have had of how the new ruling regime at the regulator is going to treat those it authorises and supervises. For those looking for a transparent and balanced regulator, there is much to disappoint. On the face of it, being tougher on becoming authorised and tighter on supervision of new firms is sensible. However, I am unsure why it takes a transformation programme and more funding to do that. Regular readers will recall my incandescent disappointment when the proposed Financial Services Compensation Scheme (FSCS) levies were announced. This result of abject failure by the FCA regime to control activity left them having to publicly apologise for their inaction on supervising London Capital & Finance and Connaught Group, while there is still more to come on Woodward and others. My hope was that the annual business plan, report and fees consultation would give us clarity on its roadmap. These historically have come together in early April to allow those with professional interests to make a balanced judgement on the what, why and how. However, the FCA has decoupled the usual plan from the fees request, and asked us to agree to its new budget blind. It also produced this a further week later than usual, giving us a cursory five weeks to respond. We will not see the plan until July. There are other signs. The tried and tested approach is that the FCA consults on the rules and structure of their fees in the late autumn, which allows it to then produce a policy www.mortgageintroducer.com

statement in Q1, setting out the agreed approach, which is followed by the April consultation on the amounts to be levied. The consultation response is, this year, rolled into the final fees paper as a ‘done deal’. In doing this, we are seeing a number of structural and financial changes for our sector. The FCA has been less than transparent in its narrative around its ongoing regulatory activities (ORA) budget and its annual funding requirement (AFR). By significantly increasing the permission and authorisation fees for networks asking to add firms, it is now recovering the full cost. This is not a new cost, but other firms were subsiding this. However, this cost transfer is not recognised in the AFR or ORA by matching reductions. For the first time we are being consulted on a new fee class on networks as part of the fee rate consultation, not as part of the usual autumn rule change process. With such a short five-week cycle, this is both unusual and not in accord with the regulatory standards for which the FCA has historically been known.

Finally, it is raising the minimum fees on consumer credit permissions, where most mortgage advice firms have no income. This breaches assurances given in previous regimes. The nature of my job and the length of time I have been in role means that I have multiple contacts at operational levels within the FCA, as well as access to the upper reaches. I appreciate that we have been in remote working for over a year, and the regulator is embarking on a transformation programme to resolve its internal issues, but the culture is ‘shot’. If it heard what I do from within a regulated firm, then the FCA would be deeply worried about its ability to perform, and therefore to survive. We have a sudden narrative indicating deep concerns within the FCA about the network model. There is no full rationale for this yet. Anecdotal evidence is that poor behaviour in the investment advice model and the general insurance structure has escalated concerns, but the new costs are on all networks and appointed representative firms. Now that the new FCA regime is in place, perhaps they need to take time to listen to the industry. M I

I am full up…

t is common for the chair and chief executive of the FCA to bemoan that the job is impossible as it regulates too many firms. It is important to remember that these people applied for the roles, and that how they risk allocate and prioritise is entirely down to them and the teams they appoint. Also, the majority of firms by volume are doctors, dentists, vets, furniture vendors or car sellers, who under the consumer credit regime can do limited harm. Indeed, a bit of spine inserted to the lenders would remove the risk almost entirely. We continually ask for proportionality, which they struggle with most. The extension of the Senior Managers and Certification Regime (SM&CR) was

not well thought through. The permissions regime is overly complex. Firms struggle to understand what they are being told, and the directory completion has been a mess. My mate who sells second-hand cars spends hours reading FCA bulletins and completing reports. It has not changed the way he sells to customers one iota, nor does he present any real risk. However, it gives FCA leadership a big badge to hide behind, crying scale when the reality is they are blind to the big issues and risks in front of them. A data-led approach is still looking through the rear-view mirror, no matter how clever. Real market-led intelligence and on the ground supervisors may be old hat, but it worked.

MAY 2021

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REVIEW

MARKET

Bucking the trend Craig Calder director of mortgages, Barclays

istorically speaking, Q2 tended to be the time of year when activity across the housing and mortgage market began to ramp up in earnest. While the spring months will generally result in more homes coming onto the market and an increasing number of potential buyers venturing out to view properties, the last year has taught us that there is no ‘sure thing’ when it comes to historical trends, actions or predictions. This means we have to remain adaptable where possible, whilst ensuring we balance any short-term reactions with a medium to longer-term vision. Sounds simple, right? Nothing is simple when it comes to the lending and intermediary space, but understanding the market, working together and being in a position to react swiftly and responsibly is key in the modern age. As is maintaining a strong understanding of the major driving forces behind this, namely the housing market and first-time buyers. So, let’s take a brief look at how these are currently shaping up. THE HOUSING MARKET

Recent figures from Rightmove suggest that a monthly price surge of 2.1% (£6,733) in April has propelled new seller asking prices to a new record high, with the national average now standing at £327,797. This figure is reported to have shattered the previous record, set in October last year, by over £4,000. This big jump comes as buyer demand sets another new record, chasing the lowest ever proportion of property available to buy. An estimated 145,000 properties were newly marketed in April, but www.mortgageintroducer.com

Rightmove warned that this is not enough to meet buyer demand. The number of sales agreed was up by 55% on the same period two years ago, reducing the stock of properties that are available to buy to the lowest proportion ever recorded by the business. The average number of days to sell a property also reached its lowest ever level, while the number of houses selling within a week reached its highest. These figures highlight just how well the housing market is performing, and how robust it has proved to be over the past 12 months. Although these record highs and lows – on the surface at least – hardly appear to bode well for first-time buyers. DEPOSITS AND FIRST-TIME BUYERS

Having said that, research from Trussle highlighted that the size of housing deposits has increased dramatically in the wake of the pandemic. Faced with limited spending options due to less commuting and the closure of hospitality and retail, it was suggested that many buyers have been able to use lockdown to review their finances with the hopes of buying a new home.

“These figures highlight just how well the housing market is performing, and how robust it has proved to be over the past 12 months” First-time buyer applications saw a 185% increase in 2020, with applications again increasing by 74% in Trussle’s data from March 2021. In 2020, only 73% were able to aﬀord a deposit greater than £15,000, but in 2021 this number was said to have increased to 87%. Spurred on by the prospect of saving up to £15,000 thanks to the stamp duty holiday, next-time buyer applications

also increased by 93% year-on-year during 2020, and a further 85% so far in 2021. Only 51% of next-time buyers had a deposit over £25,000 in 2019, but this grew to 67% in 2020 and to 76% in 2021. MORTGAGE GUARANTEE SCHEME

The issue of raising a significant deposit is a long-term issue for first-time buyers and homeowners, meaning this data represents some positive news for potential buyers. Following the recent launch of the government-backed Mortgage Guarantee Scheme, further help is at hand, with more first-time buyers and current homeowners able to secure a mortgage with a 5% deposit, which helps provide an affordable route to homeownership. The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks. As one of the lenders involved, we recently launched our own Mortgage Guarantee range, available on purchase applications, including for first-time buyers, although these products are not available on newbuild properties. To provide further support, we also increased our maximum loan limits, meaning customers applying to borrow at greater than 85% loan-tovalue (LTV) can benefit from a new maximum loan size on houses and flats. For houses with an LTV of more than 85%, the maximum has increased to £570,000, while for flats with an LTV of more than 85%, the maximum loan has increased to £275,000. We are delighted to support this scheme, but we recognise that this is only one of a number of potential options available to applicants. The introduction of such a scheme really does underline the importance and value of the advice process for those borrowers looking for the right solution to meet their aspirations, alongside current and ongoing financial requirements. M I MAY 2021

MORTGAGE INTRODUCER

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REVIEW

MARKET

How was it for you? Martin Reynolds CEO, SimplyBiz Mortgages

ow were the first four months of the year for you? I am never surprised by the resilience of our market, and how advisers adapt their business processes and models to provide great advice to the consumer, whatever is thrown at them. Whilst we quickly entered into #Lockdown3 in January, the positivity that we had has borne fruit. Talking to many of our members, and others in the market, the first few months have been record-breaking. Whilst we anticipated that Q1 would see a positive completion curve due to the then stamp duty holiday deadline, we are getting feedback that application levels have also been hitting record highs, which is great news for completions running into July at least. Feedback shows that there are still challenges around processing times with some lenders, but many are now back to pre-COVID levels and hungry for business; however, post offer delays are – for various reasons – still slowing transactions down. Can we keep the positivity going for the rest of the year? Most definitely. There are many reasons to stay positive. During the middle of March,

we started to see the big high street lenders publish their 95% loan-to-value (LTV) offerings, with the help of the government’s guarantee scheme. This was on the back of the building society and challenger banks’ launches earlier in the month. What is really positive is the plethora of deals now available at 2-year, and not just 5-year. The level of search activity at 95% is now outstripping that at 90%, which is bringing in a new customer, and one that was perhaps excluded from the original stamp duty frenzy. The key concern earlier in the year was the continued availability of stock. Whilst there was a lull in February and early March, there again seems to be an upswing in new ‘for sale’ signs. This fits with the normal yearly pattern of a slow early Q1 followed by the Easter push. Does this mean that we are already beginning to see a settling back into the normal market patterns? Again, the level of residential searches is increasing month-onmonth, including for first-time buyers. On products, the sourcing systems stated that by the end of March there were more than 11,750 mortgage products live, which was higher than March 2020, and that it was anticipated to go above 12,000 during April – yet another sign of competition heating up from lenders. The extension, and then tapering, of the stamp duty holiday has given the market another keen boost. Whilst it has pushed out further some of the

There are many reasons to remain positive about the remainder of the year

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completions that were expected in March, it has no doubt prevented thousands of chain-breaks. It will be important that, as advisers, we continue to work with our pipeline customers to ensure that we can hit June and then September with more confidence than we had for March, where we all felt there would be an extension but were never sure when it would be announced. We cannot expect the same again. The downturn and end of buy-tolet (BTL) as a long-term sustainable model has been announced many times, always prematurely. We are again hearing noises that this sector may be the hardest hit at the end of furlough if there is an increase in unemployment, as the sectors that could be hit hardest are traditionally renters and not homeowners. Whilst this economic viewpoint may be correct, you have to factor in other aspects; for example, a potential increase in divorce rates, which could in fact see more people needing to rent in the short-term. Also, if there is uncertainty in the employment market, people may be less likely to move around both in terms of jobs and rental properties, thus creating fewer void periods. The BTL market is very resilient, and many landlords are surely still looking to buy and release equity from their current portfolios to fund deposits. Finally, we have the remortgage and product transfer market. As I stated earlier in the year, 2021 will see an increase in cessations, higher than it has been for a few years. April was good, but June at £26bn, July at £23bn and October at nearly £39bn surely offers many opportunities to reconnect with your client bank. So, there are many reasons to remain positive. I know a few people raised their eyebrows at the Intermediary Mortgage Lenders Association’s forecast at the start of the year of a £283bn market for 2021, myself included, but you never know what a bit of positivity allows you to achieve. M I MAY 2021 MORTGAGE INTRODUCER

REVIEW

MARKET

A new type of mortgage prisoner Tim Hague managing partner, Sagis

ou might think that IR35 sounds like a dull detail that affects only a small number of self-employed contractors, but it’s actually a really big deal for everyone in the mortgage market. HMRC wants the self-employed to pay similar employment taxes to those paid by company employees. The rules around limited companies have been, in some cases, used to avoid this. Contractors who receive payment into a limited company of which they are a director tend to pay corporation tax at 19% – rising to 25% in 2023 – plus capital gains tax on dividends taken in lieu of a salary, at 10% or 20% depending on annual income. While this is legal, where a contractor has just one client for whom they work regularly they are technically able to pay less tax than a colleague doing exactly the same job who’s on the payroll. The latter will pay income tax up to a rate of 45% plus national insurance, typically at 12%. The Treasury also banks a further 13.8% of that worker’s earnings in employers’ national insurance contributions. HMRC estimates that just one in 10 people in the private sector who ought

IR35 implications must be taken seriously

MORTGAGE INTRODUCER MAY 2021

to have been paying employment taxes under the rules that existed before April were actually doing it right. The changes that came into effect mean that contractors’ clients now have a legal responsibility to take ‘reasonable care’ to check whether contractors they use now need to be treated the same as PAYE employees. It’s no longer up to the contractor to make sure they’re paying the full whack of tax; now it’s the company employing them. Companies that are regulated, and often listed, have big compliance and finance departments with which to get this right. The impact of this recent change is going to be seismic in some cases for individuals. As a mortgage broker, you’ll already be seeing how this might play out. Many people will now earn less and have liabilities that will create concerns about future affordability. Some homeowners may well be unable to even refinance them for the original loan amount. For contractors, moving to on-payroll equates to an overnight circa 30% reduction in income, and they are the ones who would be hit by back tax if proven that they should have assessed a role as on-payroll previously. Many contractors’ limited companies could now be regarded as insolvent as they receive no income but still incur accountancy, professional indemnity insurance (PII) and other costs like bank charges.

Many contractors still working as such will also have seen income levels reduce, and assessing two years’ accounts may not reflect realistic affordability going forward. Add the increasing difficulty of assessing income post-pandemic, and matters are becoming more complex, not less! Existing mortgage repayments will feel onerous with a significant hit on income, and those unable to secure permanent jobs may incur substantial blips on their credit file, which could affect their ability to find permanent work in the financial services industry – especially if they have to voluntarily liquidate their business. Though HMRC has said – most recently in February – that it won’t be too aggressive with billing contractors and companies for taxes unpaid under IR35 before 6 April 2021, there is a risk that the rules will be applied retrospectively. The worst case scenario is that employers unaware that their contractors ought to have been paid under IR35 before April could be on the hook for unpaid taxes going back years. It’s blank cheque territory. Contractors are also looking at this prospect with no way of knowing if HMRC will dig into past accounts. So, how do you lend to those who could be affected by this? Effectively, some of these borrowers will have a debt hanging over them which could be called in at any time by HMRC, but there’s no telling who or when this might be. That is a risk no lender is going to want to take. And yet, there are still five million self-employed people in the UK, some of whom are going to be in this position. Many of them will already have mortgages. There are answers and opportunities for lenders that are imaginative enough, and good advice will be crucial if these people are to avoid some very unpleasant outcomes. We should brace ourselves, as all this will undoubtedly impact turnaround times and packaging for new lending. M I www.mortgageintroducer.com

REVIEW

MARKET

Giving the ‘full mortgage service’ Gordon Reid business development manager, L&D, Financial Services

se any internet search engine to find the ‘best mortgage lender’ and you will find expressions like ‘cheap deals’, ‘flexibility’, ‘quality of customer service’, and ‘specialists in selfemployed or low credit rating’. Similarly, a search for ‘best mortgage broker’ references the advantages of whole of market advisers, knowledge of the mortgage market, knowing which lenders are likely to accept you and which deals you are eligible for. Interestingly, neither of these mention the importance of making sure customers receive a ‘full mortgage service’. So, what does this entail, and why is it more important than ever? A full mortgage service goes far beyond finding the best mortgage deal. It’s about considering the holistic financial needs of the customer – immediate, short and long-term – and ensuring customers understand these before committing themselves. This doesn’t mean just selling additional products. It means educating and advising, so customers fully understand the benefits and risks of having a mortgage and can make informed decisions about what’s right for them and their families. This includes helping customers paint a picture of their future lives in different situations – for example, how might they be affected by significant changes in interest rates? So, what does this mean for customers choosing a mortgage broker to help them through this often complicated and stressful process? And what does it mean for the mortgage broker who is looking to stand out from the crowd and differentiate themselves from their peers? Customers should be looking for a broker who:

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 underlines the need for long-term planning;  is prepared to ask challenging and personal questions;  shows an interest in long-term plans and aspirations;  highlights the risks and events which could impact on these plans. It is increasingly easy for customers to shop around, get access to ‘roboadvice’, or apply to a lender directly. All of this means it is critical for brokers to demonstrate the difference they make to their customers – through their skills, knowledge, services and values. In addition, unless customers are passionate about meeting their adviser in person, these days location is less relevant so competition may no longer simply be ‘local’, making it all the more important to stand out.

“There is now a greater opportunity than ever for highly skilled, knowledgeable and ethical mortgage advisers to provide a muchneeded service” So, what else has changed which makes a full mortgage service more relevant? The pandemic has certainly reduced the number of people who think ‘it’ll never happen to me’ about becoming seriously ill or losing their job. It has also made many realise how financially vulnerable they and their families are, and how future plans can change – including being postponed or even cancelled altogether. Although government schemes such as furlough have helped reduce the financial burden, there is no doubt that financial confidence has taken a significant hit. Many are much more aware of the need to make better provisions for themselves. In addition, the increase in the average age of first-time buyers, and of state retirement age, have further

implications for the mortgage market and the long-term needs of customers. Many may need to support family members or continue to have a mortgage beyond the age at which they would like to retire. They may need to continue to work at an age where morbidity rates and the likelihood of a reduction or total loss of income are considerably higher. So there may be vulnerability issues to consider, too. There is a greater opportunity than ever for highly skilled, knowledgeable and ethical mortgage advisers to provide a much-needed service. The advisers that will be most successful are those who can focus on not only how much a customer can afford to borrow, but who can also help customers understand how things can and will change over time. That’s critical if they are to make well informed decisions. As part of this, a customer contact and review strategy is essential – one based on knowledge of your customer’s life events or potential changes in circumstances, rather than just linked to the end of a mortgage deal. Whilst not all mortgage advisers will want to be later life or equity release specialists, or provide advice on protection, it is critical to have a basic understanding of the full range of options available. Also, building a trusted network so that you can hand over to a suitably qualified specialist where appropriate will also ensure your customers receive a full and seamless service. A great starting place might be to review your current knowledge, and perhaps top this up with an additional qualification, such as our Certificate in Regulated Equity Release, or the recently introduced Certificate in Protection. Those wishing to truly differentiate themselves could consider studying the Level 4 CeMAP Diploma, which focuses on the more complex scenarios which make up an considerable, and growing, section of the market. M I MAY 2021 MORTGAGE INTRODUCER

REVIEW

GREEN MORTGAGES

Kickstarting the green revolution Shaun Almond managing director, HL Partnership

egardless of where you stand on green issues, I was reminded just how committed the government is to the goal of zero carbon by a recent letter from the Chancellor of the Exchequer to the chief executive of the Financial Conduct Authority (FCA), firmly reminding him of what the government expects from the regulator in pursuing a strategy in line with the country’s commitment to a greener future. GOVERNMENT EXPECTATIONS

The specific reference is worth printing in full, because although it appears as a reminder, it serves as a forceful underlining of the government’s expectations of one of our primary regulators: vii. Climate Change The government wishes to deliver a financial system which supports and enables a net-zero economy by mobilising private finance towards sustainable and resilient growth and is resilient to the physical and transition risks that climate change presents. The FCA should have regard to the government’s commitment to achieve a net-zero economy by 2050 under the Climate Change Act 2008 (Order 2019) when considering how to advance its objectives and discharge its functions. Cynics might argue that advising on mortgages and insurance has no real connection to melting ice caps or 30-degree February heat, and that there’s nothing stopping lenders and providers from going green by cutting emissions or planting trees.

MORTGAGE INTRODUCER

MAY 2021

However, I believe the government is reminding the regulator that it expects it to use its position to put more emphasis on ensuring that the mortgage finance industry plays its part in encouraging homeowners to upgrade their green credentials, and supporting the purchase of properties with Energy Performance Certificates (EPC) at a certain level and the modernisation of existing property stock with the creation of green mortgages. I expect to see the FCA increasing its emphasis on greening the industry and that its interpretation of the government’s wishes will become less a nudge and more a desired expectation,

“Current EPC standards will inevitably be recalibrated, and the bar will rise. Older property will not qualify for the best green mortgage deals as it becomes more diﬃcult to retrofit the latest eco-enhancements” by instructing lenders to ‘do their bit’ in marketing green mortgages. Indirectly, builders are going to have to buy in, too, and their enthusiasm for building more eco-friendly property will depend on the tastes of the buying public becoming more sensitised to the eco benefits in their expectations. EPC ratings with their current qualification criteria and the value placed upon them will, for the time being, represent a standard that all parties can understand and work with. For lenders offering green mortgages, the EPC qualification will continue to be the gold standard for a property to join the ‘climate change club’ and make its buyers eligible for a suitable mortgage product.

However, while the buying public is becoming more sensitised to climate change and willing to choose more energy eﬃcient homes, a future situation must not be allowed to develop where a kind of property apartheid exists. Current EPC standards will inevitably be recalibrated, and the bar will rise. Older property will not qualify for the best green mortgage deals as it becomes more diﬃcult to retrofit the latest eco-enhancements. We could face a situation where older housing stock becomes the unwanted love child of the property market. ECO-RENOVATION

The irony is that the UK is not exactly running a surplus of housing currently, and is unlikely to do so any time soon. In the meantime, the government’s ambitious targets for cutting our carbon footprint will see all parties having to develop a plan that avoids a ‘new house good, old house bad’ scenario. Perhaps we could see customers being incentivised to take on older properties to eco-renovate? According to the government’s national statistics, residential properties account for 15% of the UK’s total climate emissions. Other figures estimate that domestic heating, hot water and cooking account for 23% of our national emissions alone. If the UK is to meet its reduction targets by 2050, increasing the take-up of alternatives to gas boilers and appliances powered by oil and liquefied petroleum gas, along with better building practices to improve insulation, will need to accelerate rapidly. The diﬃculty is how to supply low carbon alternatives at a price that is not going to hinder adoption by the buying public. In the lending sector, the promotion of mortgages that reward buyers who opt for properties with measurable ecocredentials will accelerate. The real battle will be about the levers the government can effectively use to help ensure that housing stock can keep pace with what will be the increasingly expensive – but necessary – standards required to reduce our national footprint. M I www.mortgageintroducer.com

REVIEW

LONDON

Things change and things stay the same Robin Johnson managing director, Kinleigh, Folkard and Hayward Professional Services

ntil recently, I rather felt as though I’d been living the same day over and over again for the past year. Time has passed without it feeling like anything has happened – did that steak and Malbec we had for supper happen last week, or last month? Or was it yesterday? You know what I mean. As I write, I have ventured back onto the office, and England is emerging from the strictest level of lockdown. We are now allowed to get back to restaurant terraces and pub gardens. The vaccine roll-out continues, and life feels as though it’s taking a tentative step towards a new normal. March brought the Budget’s extension to the stamp duty holiday – I have mixed views on the double cliff-edge, but that’s another column for another day – and April brought the 95% Mortgage Guarantee Scheme. First of all, nothing is perfect and this scheme conforms to that tenet. It is, however, a powerful influencer on buyer behaviour and market sentiment. Together with the extended holiday on stamp duty – albeit tapering back from July – we have seen the market in London and the South East explode. Statistics pulled together by independent property analysts LonRes show new instructions in the prime London market surged by 72% in March year-on-year. Transactions were 40% higher than a year ago. New listings were also up at 24% over the five-year average for March. The housing market is moving. Transactions beget transactions, and that activity is being fuelled by the market for homes under the £1m mark.

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This sector was the busiest of any, with 52% more properties sold in the first quarter of this year than in the same period of 2020. So much of this activity is being driven by the effect that successive lockdowns have had on our relationships with our homes. People like myself are going out to work five days a week, while others are socialising again, but being locked in a room for more than a year is likely to have changed most people’s tolerance for a confined space. Our expectations of what we need from a home have changed – possibly forever – as they become an ever more essential part of our working lives. We are seeing houses with gardens become even more popular with buyers – even those without children or pets. Pets, that’s another thing – with everyone stuck at home, demand for puppies and kittens has gone through the roof. It’s impossible to walk through a London park without tripping over frantic puppies flinging themselves on top of each other. Young professionals living in flats with small animals are discovering that outside space is not just a ‘nice to have’ anymore. Families are also growing, I’ve even heard people talking about ‘lockdown boomers’ – babies born as a result of

lots more people getting pregnant. Growing families need bigger homes. The inevitable rise in the number of people working from home, even where they may return to the office a day or two a week, is also rejigging the need for home office space. Whether this is in the garden, a box room or a spare bedroom, space is now a premium. Many people are moving out of London, realising that they can achieve a different balance between work and life as a result of companies being forced to let them work more flexibly. That is in turn freeing up homes in the city for those desperate to start working and rising up the career ladder after an impossibly awful year. For several decades now, London property market stock levels have been relatively low, prices have been high, and stamp duty bills made it a better financial prospect to extend homes instead of moving. The coronavirus pandemic has sparked huge social change. Those stock levels are changing, and this injection of property liquidity has meant that, with the right level of government support, housing transactions are climbing again. Many of us enjoy the benefits of higher house prices, but as a market we need transactions. It might sound counterintuitive to hear me wax lyrical about people moving out of London, but the market has always been a numbers game. Transactions are what counts. One person moves out and another moves in. Things change, and things stay the same. M I

London: One person moves out and another moves in

MAY 2021 MORTGAGE INTRODUCER

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HIGH NET WORTH

Rural living and high net worth Jean Errington business development manager, Harpenden Building Society

quick glance at history reveals that high net worth (HNW) individuals have, over the centuries, resided in rural property during periods of public health crisis, helping them avoid highly populated areas and infection. In many ways today’s pandemic situation is no different, with a surge in more affluent homeowners moving from our big cities to the countryside during COVID-19. This trend has not only provided increased opportunities for lenders and mortgage brokers servicing the HNW sector over the last year, but also looks likely to remain. HISTORY REPEATING ITSELF

1665-6 was the last major epidemic of the plague to occur in England. As was normal, the plague concentrated in London, with the HNW individuals of the time – including King Charles II – moving from the capital to their country estates to better avoid the disease. Even Parliament was held in leafy Hertfordshire, where our society is based, to avoid the disease during an earlier outbreak. There are numerous more examples. Later in history, instances are linked to respiratory conditions associated with the industrial revolution, right through to the clean air act being implemented in the 1950s, leading those that could afford it to live more permanently in rural areas that were better suited to a healthier way of living. ESCAPE TO THE COUNTRY

A housing survey undertaken during the 2020 pandemic by the London Assembly Housing Committee illustrates a modern day equivalent. The survey outlined that one in seven Londoners (14%) wanted to leave.

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Financial uncertainty and the cost of moving were cited as the two biggest reasons for those surveyed not being able to move home, a factor seemingly less relevant to HNW individuals who – with the greater flexibility provided by wealth – have been able to lead the charge when it comes to moving out to more rural locations over this last year. HNW PROPERTY DEMAND

Paul Welch, founder and CEO of largemortgageloans.com, which specialises in mortgage solutions for HNW individuals, sheds further light on the situation. He says: “It’s been an extraordinary year in the HNW space, with significant change seen with regard to demand versus location when it comes to financing a high-end property. “One of the most notable features for us during COVID-19 has been the significant number of our HNW clients looking to move from the city, out to the countryside. “In our experience, demand to own bigger properties in a rural location surrounded by wide open space has never been greater. “Over the past year, one of the primary motivations for a rural relocation has been to move away from the risk of COVID-19, and with accelerated use of improved technology, this has enabled our C-suite customers, business owners, and wider HNW individuals to operate from locations away from the cities. “There’s no longer the need to live close to the traditional office, it’s never been easier to manage affairs from a rural, home base.” Welch continues: “Far more emphasis is now being placed by HNW individuals on time with family, healthier living, better access to the great outdoors, home entertaining space and, of course, home offices. “Despite normality beginning to return and some entities opening their offices again, we believe HNW individuals having sampled rural living will be reluctant to give it up, retaining

the demand for quality, high spec properties in a more rural location.” CHOOSING A LENDER

So, what should be considered by the broker when choosing a lender to partner with in these circumstances? Welch adds: “Choosing the right lender to work with, in an often multifaceted mortgage situation, is key to securing the right mortgage solution for our clients. “Many high street institutions will not look beyond their standard lending criteria, so of course the complex incomes of many HNW individuals may not fit their lending model. “Other considerations are also important. It may sound simple, but being able to get answers from a

“Far more emphasis is now being placed by HNW individuals on time with family, healthier living, better access to the great outdoors, home entertaining space and, of course, home offices” lender in a timely way, working with underwriters who have specialist experience in the HNW sector, and having products that are fairly priced and relevant are all important considerations for us when selecting a lender on behalf of our clients.” At Harpenden, we have a long tradition of servicing the HNW market. Specialists like ourselves, experienced and knowledgeable in this sector, spend time assessing complex income structures, and looking at cases on an individual basis. It’s time well spent. Working through the analysis on a case and exploring all possible solutions often leads to a successful conclusion. A personalised, highly analytical and creative approach to lending remains important to us when supporting brokers operating in the HNW space going forward. M I www.mortgageintroducer.com

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HIGH NET WORTH

The need for speed in 2021 Peter Izard business development manager, Investec Private Bank

uying a new home can be an exciting journey, but we all know the process doesn’t come without its challenges. As post-lockdown demand increases, buyers will need to be prepared to move quickly if looking to purchase a property in the coming months. With the average time for completion surging from 90 days to between 110 and 115 days over the past year, the need to secure capital quickly could be a key differentiator for buyers. In this article, I will explore some crucial factors for brokers and financial advisers to bear in mind, including the importance of working with the right lender. AN INCREASINGLY COMPETITIVE MARKET

As COVID-19 restrictions are eased in the coming months and the UK’s vaccine roll-out continues, it’s anticipated that a surge of buyers who delayed viewings during lockdown could look to act now. An extension to the stamp duty holiday announced in the Spring Budget has also set the stage for a competitive market, as buyers rush to complete purchases ahead of 30 September 2021. Because of these factors, Savills predicts house prices will grow by an average of 4% over the course of 2021. This means that being able to complete a transaction quickly could give buyers a competitive advantage when securing a property. Traditionally, mortgage advice service HomeOwners Alliance suggested that buyers could expect www.mortgageintroducer.com

to wait two to four weeks to receive a mortgage offer. Since the pandemic, it says buyers need to accommodate four or more weeks within the process, due to the increased demand. However, specialist lenders which complete credit checks and property valuations proactively could allow a buyer to secure loan approval within a matter of days. DELAYS IN PROPERTY SALES

If a buyer has faced delays when selling their existing home, this may have impacted the progress of a new mortgage application that hinges on the capital they receive from the sale. Recent data from Quick Move has found that more than half (52%) of transactions in England and Wales fell through before completion in the third quarter of 2020. Of these transactions, more than 31% were stated to have fallen through because a buyer pulled out of the sale. It will be important for buyers to consider working with a lender that can take these situations into account. At Investec, for example, we try to lend creatively to support our clients’

financial situations. So, if they’re waiting on the sale of a previous property, or perhaps a significant bonus, we can work with them to consider their options. WORKING WITH COMPLEX INCOME STRUCTURES

Lastly, it’s important to consider that many buyers in the market – especially high net worth individuals – may have complex income structures, which could in turn have been further complicated by the pandemic. These individuals may well have income drawn from various investment portfolios, carried interests or – in the case of overseas buyers – in different currencies. While these are certainly valid incomes, some may not pass the ‘reliability’ requirements in place at high-street banks, and could affect a buyer’s ability to secure the loan they need in good time. Within the prime property market in particular, this means that lenders and advisers must understand every buyer’s unique circumstances. Provided a lender has an understanding of the buyer’s financial situation, and can see eye-to-eye on their specific capital requirements, there shouldn’t be any additional time required to secure a loan. There are still ways for buyers to purchase their new home quickly and efficiently in this new climate. M I

Being able to complete a transaction quickly could give buyers an advantage when securing a property

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RECRUITMENT

Targets alone will not improve diversity Xxxxxxxxxx Pete Gwilliam director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Virtus Search

he drive to level up the playing field for women has broken some of the glass ceilings, but have the changes gone far enough to embolden firms to source, assess and develop individuals with a diverse background from outside of the sector? Ultimately, without new blood entering the mortgage world above trainee and entry level, the sector will take a long time before it becomes a diverse place where talent from all backgrounds can thrive, and importantly, will take a long time before under-represented backgrounds are more visible in boardrooms and senior management teams. More senior role models from diverse backgrounds will help truly champion inclusion,challenge the status quo and break down barriers – seeing a diverse leadership team is really believing when it comes to how seriously firms are taking equity and inclusion. Some firms have introduced accountability frameworks, such as Goldman Sachs, which requires hiring managers to put forward at least two diverse candidates, demonstrate that a sufficiently diverse range of candidates have been considered, and explain the factors leading to their hiring decisions. Lloyds Banking Group, meanwhile, requires any waiver of its gender diverse shortlist policy to be signed off by a member of the executive team. Other firms are starting to challenge external recruiting partners. For example, Nottingham Building Society has included clauses regarding diversity requirements in its agreements. We know institutional shareholders

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and investors are becoming more inclined to include diversity and inclusion considerations as part of investment decisions, and the Financial Conduct Authority (FCA) has made it clear it is sharpening its focus on how representative firms are of the markets they serve. TIME TO FILL

These are of course welcome, proactive steps to tackle the embedded lack of diversity in the mortgage sector. However, there is a natural tension that exists between the desire to have an extensive sourcing plan and the desire to complete the process and make an appointment at the earliest opportunity. If speed is the primary focus of both recruiters and hiring managers, then anything that is perceived to slow down the process will be met with resistance. Even with good intentions, a lot of diversity efforts can fail because of the underlying pressure to fill roles quickly. Breaking this common ‘time to fill’ prioritisation is going to require firms to make sure that elevating equality initiatives are central to a company’s short and long-term success. To do so, they can help hiring managers accept a slightly slower time to fill as a trade-off worth making if they have used that extra time to use data to inform on how sourcing strategies can create a diverse choice Clearly executives and management need to have some challenging conversations about how they resource teams, how they may be reinforcing speed over diversity, and how they need to communicate a commitment to diversity in a way that doesn’t allow the time to fill metric to work against the time needed to build broader recruitment solutions. Inextricably linked to the focus on the speed of the appointment is the ‘fishing in the same pool’ approach –

namely that previous hires give a sense of comfort and predictability. Having successfully hired from a specific source previously inclines the hiring manager to go back to the same solution without considering the alternatives. If the management reinforces a norm of familiarity, and don’t challenge a time to fill mentality, because people from underrepresented groups are not commonly found in familiar companies and schools, hiring managers will inevitably be drawn to the profiles that have worked out in the past. This is particularly the case if widening a search to find diverse individuals elsewhere will cost time. Of course, firms have then to ensure that assessment tools used in the financial services market allow skills, values and potential to come to the fore. The culture of the firm is obviously going to be a big factor in attracting new hires, and one immediate indication will be how people from wider backgrounds feel about the assessment models used. Problem solving, critical reasoning and data analysis are all key parts of our industry, yet it is very rare for the sector to invest in building assessment models that allow these skills to be assessed, especially below executive level. The demand for more diverse shortlists and the use of more diverse interview panels are welcome steps in the right direction, but these need to be joined up to wider initiatives informed by sector specific data. There are currently only 13.2% – up from 10.9% in 2019 – of executive board members who are female in the FTSE 100, whilst the percentage of boards that have female non-executive directors (NEDs) was at an all-time high of 40.8%, from 38.9% in 2019. So, what can be seen as real progress might in effect not have created anywhere near the level of desired change, beyond progressing towards a target, given that NEDs might be visible on a website, but are very rarely involved with the living and breathing culture of a firm, and are certainly less likely to be available on a regular basis for those looking to find senior role models. M I www.mortgageintroducer.com

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FIRST-TIME BUYERS

Support will provide market confidence Stuart Miller customer director, Newcastle Building Society

hile extending the stamp duty holiday was top of the wishlist for March’s Budget for most of us in the mortgage market, the announcement of a new Mortgage Guarantee Scheme was also welcome. It formally launched on 19 April, though a number of lenders sought to pip the scheme to the post, launching their own small deposit products earlier in the month. First-time buyers will be extremely heartened to find that their aspirations of becoming homeowners look to be rather closer in reach than they did just a couple of months ago. Search volumes in March, even before the scheme commenced, are testament to the strong demand there is out there. According to the latest mortgage report from sourcing platform Twenty7Tec, the number of searches hit a new high in March, marking the firm’s best ever monthly figures. Phil Bailey, director at Twenty7tec, said: “The market also moved further to purchase as opposed to remortgage. Purchase now represents almost 70% of the market – almost a mirror image of 12 months ago.” This is positive, particularly as Twenty7Tec’s numbers also showed that the proportion of purchase searches on behalf of first-time buyers recovered after a dip in February. Indeed, while the volume of searches grew in every loan-to-value (LTV) range during March 2021, the most marked change was seen in the 95% LTV range, which now outranks the 90% market for volume, according to the platform. www.mortgageintroducer.com

A buoyant property market is undoubtedly a good thing, as is a market that can support a broad range of buyers. But those in the industry know that the guarantee scheme is as much to do with underpinning market confidence as it is getting more firsttime buyers on the property ladder. The reality is that the next 12 months are going to be challenging for some people. What the past year of living through a pandemic has taught us is that the country is divided; those with bigger houses, gardens and jobs that are possible to do from anywhere have enjoyed more time at home and saved money in the process, while those without these advantages have had a challenging time, trapped in flats too small for their families in a lockdown scenario, and seeking the opportunity to move to more suitable accommodation with garden and space. LENDER SUPPORT

The market needs support, which it has had from the government, but it also needs more from lenders. Our new Help to Buy range is part of a push that also includes collaborations across the industry to provide additional options and support people’s aspirations to become homeowners. However, that does not solve the bigger question of supply. Homes England figures show that in the six-month period between 1 April and 30 September 2020 there were 11,313 housing starts on-site – the lowest number since 2012-13. The number of completions was also its lowest since 2015-16. Homes England said specifically that the reduction in both starts and completions are a result of a slow-down in house building activity caused by the COVID-19 pandemic. The imbalance between supply and demand is not a new issue, as consistently rising house prices

indicate. But the sharp drop in output from house builders across the UK – in Scotland, construction was halted in its entirety for the whole of the first lockdown – is going to put a strain on affordability, particularly for those with smaller deposits. Ideally, the confidence provided to lenders by the government’s Mortgage Guarantee Scheme will act as a stimulus to the cautious approach taken to high LTV lending among lender credit committees.

“The increase in options for first-time buyers is extremely welcome and will act as a boost to sentiment and deliver confidence to buyers” This was understandable in an economy that looked vulnerable to a fall in property values; however, values post-lockdown continue to grow and this should continue in the mediumterm, so long as the interest rate environment remains benign. The unintended consequence of this is that whilst the availability of low deposit mortgages is a boost for firsttime buyers, the rise in house prices at a rate significantly ahead of wage inflation means that many can now find the required deposit, but cannot afford to borrow the required amount to buy their dream home. The latest Rightmove figures indicate that the average price paid by a firsttime buyer in March was £203,564. This would require a purchaser to have an income of £45,000, either solely or jointly, to support a 95% loan. The significant increase in options for first-time buyers – whether via the government guarantee scheme or through lenders utilising their own indemnity guarantee schemes – is extremely welcome, and will act as a boost to sentiment and deliver confidence to buyers. Solving supply of products is one side of the equation, lenders will also need to review the approach to affordability imposed during COVID-19 if we are going to truly enable this important sector in the current market. M I MAY 2021 MORTGAGE INTRODUCER

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TECHNOLOGY

Finding a successful technology strategy Steve Carruthers Xxxxxxxxxx principal mortgage consultant, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Iress

political, economic, social, and technological (PEST) analysis has technology as a category for a reason. It has long been accepted that new technologies revolutionise the way we do business. Technology has levelled playing fields, enabled new business models, improved productivity and reduced costs. The role of technology was an ongoing concern before the pandemic and will continue to be crucial long after. While the impact of COVID-19 will remain with us for many months to come, the core issues facing organisations remain largely as they were before. I am experiencing a lot of renewed interest in technology now that lenders are emerging from coping with the pandemic and are beginning to think about their collective future. Every business has been aware that consumers’ adoption of tech into their daily lives has not slowed during the pandemic. This raises some interesting questions about the notion of the customer experience. I have always been slightly uncomfortable with the idea of customer ownership. The truth is that in the complex value chain that is mortgage lending, many points of contact mean the borrower’s primary relationship may not reside with the lender, but with, for example, the broker. It may even oscillate during the mortgage journey, and at times include others, such as conveyancers. Customer stewardship then is still up for grabs. Aggregators and new entrants may put pressure on the remortgage

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market and squeeze margins in vanilla lending, but things may get worse if they disaggregate, disrupt and reduce institutions to participants in a commodity race to offer finance. The right user experience for brokers and borrowers is a real issue. I am also hearing about another issue. The pandemic may have fastforwarded the next five years in terms of remote technology expectations and the interfaces that deliver them, but how do you make a quantum leap and future-proof your business when, in resource terms, you are just about coping with the day-to-day?

“To get what you want, you must engage with the subject knowing what your vision is, and be acutely aware of the upsides and downsides of not acting. Good advice starts when you begin to decide what it is you are going to do – not after” Underwriting is becoming more complex. Furlough, unemployment and deferred payments mean resources will, for many lenders, be consumed by the ‘business as usual’ practices rather than future-scaping and delivering the best practices of tomorrow. Add into that equation a more competitive lending environment thanks to government support for 95% loan-to-value (LTV) lending, and the return of lenders offering products not supported by the government, and you have a heady mix that will keep the staff of many institutions busy for the foreseeable future. The potential to make quick decisions and repent at your leisure is huge. To get what you want, you must

engage with the subject knowing what your vision is, and be acutely aware of the upsides and downsides of not acting. Good advice starts when you begin to decide what it is you are going to do – not after. If you are about to set upon this journey – or even need to change course – you have choices. You may decide to tackle these things yourselves, or you may choose to partner. The decision is, of course, more nuanced than in-house or outsource. Hybrid arrangements are becoming commonplace, but whatever tack you choose to take, businesses need to understand the implications and subsequent risks. Time and again, technology has proven to be a business’ greatest opportunity, but also its largest threat if done wrong. The right advice, partnership and leadership is important. What expertise do I need? Who is best equipped to deliver my solution? Does their culture fit with mine? Few financial services boardrooms have people who can code in them, which means executives can feel a bit like the proverbial patient at the doctor, rather than a customer. Asymmetric information is a fact of economics and can cause huge discomfort when it comes to buying things you don’t fully understand. Unlike the manufacturing or automotive industry, where engineers sit on the boards, many executives do not understand the spaghetti of systems over which they preside. Any company offering help needs to be able to understand and work with the entire value chain and offer solutions that can not only add value, but offer opportunity to the other parts of the digital ecosystem. Having a vision is as important as having the tools to build it, but that vision has to fit with your own direction of travel. When you stand back, technology in most cases leads to a predominant way of doing things. The trick is understanding what you gain from the preferred route you are taking, and what you need to do to retain your difference, so customers continue to value what you do. M I www.mortgageintroducer.com

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TECHNOLOGY

The technological balancing act David Lownds head of marketing and business development, Hanley Economic Building Society

n the midst of massive internal and external tech overhaul, it’s fair to say that our eyes have certainly been opened to the challenges, time, resources and opportunities involved in such a project. We also continue to learn a huge amount about our business, people, customers and intermediary partners throughout this process. It’s important for any business to constantly evolve and strive to better service the shifting needs of customers. The transformation of our systems to a more modern model not only reflects the innovative nature of our lending, and investment in meeting these obligations, but it also means that we now have a solid tech base in place from which we can be more receptive to further digital change. As such, it was interesting to see a recent report published by Whitecap Consulting in partnership with the Building Societies Association (BSA), which highlighted that more than half (55%) of building societies view open banking as an opportunity. It went on to add that more than a third of respondents have not yet assessed the benefits of open banking for their business, with 10% viewing it as a potential threat. Among building societies, 79% said that open banking would enhance the mortgage underwriting process, 76% suggested it would improve customer data connectivity and 71% that it would improve operational efficiencies. The research also found that 93% of building societies said mutuality affects their decision-making; 66% said mutuality is about culture, www.mortgageintroducer.com

values and social purpose, and 71% consider the branch network to be a critical part of regionality. The majority (90%) of building societies considered community involvement to be a commitment to regionality, 67% identified digital transformation as the primary challenge over the next five years, and 65% of all stakeholders surveyed belive open banking to be an opportunity for the sector. According to the senior leaders interviewed as part of the report, digital transformation is the primary challenge for the sector over the next five years, while the need to remain relevant to customers and improve engagement were also cited as key priorities. From our perspective, whilst we acknowledge our history and

our ongoing commitment to our community, we also have to look to the future. Open banking and open finance represent exciting developments, and building a better understanding of any potential borrower’s financial picture will become an increasingly powerful tool for lenders and intermediaries. As a forward-thinking lender with a growing intermediary focus, it’s important to include ourselves in such conversations. However, just as important is realising our tech limitations and making sure we don’t start running before our new systems can walk. Whilst we do believe our new systems will open a new chapter in the book of an institution which is almost 170 years old, this will not lead us to ignore our history, or the people within our community that have supported us in the journey. This is an example of the kind of balancing act which all mutuals are currently facing to varying degrees – but one which we are relishing. M I

It is important to balance the integrity of technology systems with improved customer innovation

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LENDING

The lenders’ dilemma Tony Marshall managing director, Equifinance

nderwriting has always been a balancing act between the application of lending criteria and the importance attached to customers’ circumstances, their history, and how it informs their potential as good payers. In these days of lending by algorithm, it is refreshing to see more lenders across the spectrum no longer being reliant on the ‘computer says no’ school of underwriting. In the second charge sector particularly, underwriting generally remains a human-dominated experience, with the accent on looking at the client’s individual experience as much as slavishly following the criteria. NEW CHALLENGES

Leaving aside the property being sound and valued correctly, underwriting still boils down to two main elements: ability to repay – namely affordability – and intent to repay, which looks at past and present creditworthiness. In a post-lockdown world, lenders face a new challenge. With a buoyant property market and many prospective buyers, a proportion of whom are coming off furlough or had elected to take a break from monthly payments, lenders have to make decisions based on a new demographic which has not existed before. Are payment deferrals and holidays a sign of unaffordability, or of employment instability? The fact is that it will raise questions. Lenders must satisfy themselves that not only has the customer the ability to repay, but also the intent to do so. Deferrals must be taken into consideration in the underwriting process, even though taking a payment break might just be something a customer simply did because they were allowed to. In fact, might this in itself

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indicate a behavioural issue that might come back to bite in the future? Then, let’s look at whether or when it is OK to lend to a person who has been, or is, on furlough. Lenders not only have to consider normal affordability protocols, but also how that might change with the current circumstances of furlough or payment deferral applicants. We have to predict how this extra dimension feeds into the likelihood of future negative events, and might affect affordability going forward. At the same time, we need to look at the historical credit profile of the applicant and see what – if anything – caused them to seek a deferral. LEVEL PLAYING FIELD

There is an argument that, provided the customer qualifies on current surplus requirements and stress tests, the lender is theoretically entitled to lend, with all else being equal and without a foreseeable event that may cause financial distress. But it’s not as simple as that. Lenders see many cases where customers can evidence affordability in both circumstances – even with furlough and payment holidays – but the fact remains that furlough was introduced to avoid redundancy, and payment holidays to ease financially stressed consumers at a time when they potentially faced redundancy or were on reduced income. If the lender was to lend under either of the above circumstances,

blindly based on affordability tests, there is a high probability that it would be challenged at a later date for irresponsible lending and, as such, face the penalties for doing so. If ever there was a case for levelling the playing field in respect of a customer’s responsibility for their decision to borrow, this situation sums up how the scales are currently tipped against the lender. This is a common challenge for all lenders presently, and is already creating financial exclusion, not only for those that are currently furloughed or on a payment holiday, but also for those that have recently returned to regular employment. It could be argued that this is a clear indication of financial stress or instability in employment. However, the further lenders go down that particular rabbit hole, the more there is a danger that perfectly good cases might get flushed away along with the ones that really might cause problems further down the line. Our attitude is to take a common sense approach and rely on the experience and knowledge of our underwriters, backed up by the increasingly effective credit checking facilities available to lenders. By not relying solely and slavishly on affordability tests, we can steer a more consistent course. Advisers can therefore feel that their clients are being assessed fairly, without compromising our underwriting integrity. M I

Affordability: The scales are tipped against the lender

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BUY-TO-LET

Lenders a force for raising PRS standards Richard Rowntree managing director of mortgages, Paragon

ver the past two decades, significant progress has been made in improving the standard of the UK’s housing stock. Of course, efforts to further improve need to continue, and we support calls for an accountable private rented sector (PRS) through policies such as the creation of a National Landlord Register, which housing charity Shelter says would force landlords to prove that properties meet essential safety standards. In the interest of balance, I feel we should also acknowledge the commitment and progress that many landlords have made in providing tenants with a good quality home. Around three quarters of homes in the sector are now classed as decent, compared to less than half in 2006, the year when the government’s Decent Homes Standard was updated. Despite this endeavour, though, the PRS has been outperformed by the owner-occupied and social sectors when we look at non-decent properties by absolute numbers. Since 2006, the number of nondecent PRS homes has fallen from 1.21 million to 1.01 million at the latest count. During the same period, the owner-occupied sector has seen the number of non-decent homes decrease from 5.31 million to 2.54 million, while social sector non-decent homes now number just over half a million after a reduction from 1.13 million. The reasons people make improvements to their properties are many, but I feel that a contributor to this stagnation of some PRS stock

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is the potential for owners of legacy properties to have less motivation to undertake refurbishments. Homeowners, on the other hand, can add value to their properties while also improving their own environment. The difference in the number and proportion of decent stock suggests that the improving standard of rented homes has been driven by a rise in property brought into the sector – a 31% increase since 2009 brought the total to 4.7 million properties by 2019 – which has helped to diminish the percentage of non-decent stock. It should also be noted that these landlords, who are active in the market, often will invest in their existing property, too, annually spending a combined £4.7bn on maintenance and improvements, according to data from insurance firm LV=. Whether adding new properties to the sector or enhancing existing stock, buy-to-let (BTL) lending has been a force for good, and the improvements in standards seen over the past 15 years correspond with a significant increase in lending between 2006 and 2019 – the number of outstanding buy-to-let mortgages has risen from 835,000 to 1.9 million. Overall, 1.3 million buy-to-let loans for new house purchase have been written since 2006, but it’s important to consider overall lending. Failing

UK housing stock: Significant improvements

to do so could discount significant numbers of landlords who remortgage existing loans or take out a further advance to raise funds for renovations to their rental properties. In addition, as well as financing improvements made to homes already in the PRS, lenders can be at the forefront of the quality control of property being brought into the sector, identifying issues such as insufficient space, poor condition and safety concerns, through stringent underwriting and property assessment. Landlords will be increasingly turning to lenders for support in their role in solving the sustainability puzzle, too, something I’ve discussed in Mortgage Introducer previously. Unlike the number of decent homes, the PRS is ahead of the owneroccupied sector in terms of the energy efficiency of its stock – though both are behind the social sector – as measured by the Standard Assessment Procedure (SAP) rating. Despite this, it seems that privately rented property is the priority in the government’s ambitious target of making the UK’s housing stock carbon neutral by 2050. Under government proposals, all new property being let for new tenancies in the PRS must have an energy performance rating of at least C by 1 April 2025. By 2028, this will apply to all let property. Like many sectors, financial services needs to identify its response to what is now being considered by some as a climate emergency. This will take many forms, but we can help by developing products that incentivise investment in sustainable housing, either through the purchase of homes that are built to more energy efficient specifications or retrofitting of things like insulation. This shows that, although it may appear from the outside that the responsibility for improving standards of PRS homes sits squarely on the shoulders of landlords, lenders have played an important part so far, and will continue to do so as demand for good quality housing is matched by a need for society to minimise its negative impact on the environment. M I MAY 2021 MORTGAGE INTRODUCER

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Good news for both advisers and landlords Bob Young chief executive officer, Fleet Mortgages

here are all manner of pressures across the UK housing market at any given time. When I say pressures, I’m not necessarily saying these are ‘drags’ which can only result in a negative response. Some commentators, for instance, like to talk about the ‘pressure’ that first-time buyer activity places upon landlords. They are working under the assumption that it’s a zero-sum game – that if there are more incentives and options for first-timers, then it surely impacts negatively on landlords, who might see both potential property supply and potential tenants move out of reach. Governments have laboured under this assumption for many years. The argument has run that a smaller number of first-time buyers is linked to landlords hoovering up the property supply that they would normally take. They have conveniently forgotten the other pressures brought to bear on potential owner-occupiers, not least deposits, wage levels, affordable home provision, and – dare I say it – that some people genuinely want to rent for many different reasons. That said, it hasn’t stopped governments of various hues focusing on the first-time buyer market, and as a result I dare say there have been a small number of former private rental sector (PRS) properties that have moved into first-time buyer hands. But I doubt this has been anywhere near the number the government anticipated, especially those that believe landlords are solely responsible for buying properties that ‘should’ go to first-time buyers.

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Clearly, the mortgage interest tax relief changes have had an impact, but landlords overwhelmingly tend to be in this for the long haul – because they have to be – and there have been options available to them in order to mitigate some of this. The point to make here – and this is undeniably good for the whole UK housing mix and ensuring the housing supply gap is not a chasm – is that PRS landlords have not exited the market in droves, and even when they do tend to sell, these properties are, in the main, bought by other landlords anyway, rather than first-timers. LONG-TERM OUTLOOK

Recent figures from Hamptons show that, in 2020, 131,900 properties were sold by landlords in the UK. Again, we don’t know how many of those properties were bought by either other landlords or owner-occupiers, but this was the smallest sell-off since 2013. Those who did sell tended to have owned the properties for, on average, over nine years, again proving that this is a long-term investment. Now, there is an argument to suggest that the smaller number of PRS sales last year is simply due to landlords holding onto property, waiting for the pandemic to be over or waiting to recoup potential lost rents that they may have been forced to accept as a result of COVID-19. I’m not so sure this is the case. If anything, we have seen existing landlords much more inclined to add to their portfolios recently, particularly since the launch of the stamp duty holiday last July, and given this has been extended and tapered for another four to five months, there is still a further incentive to purchase in 2021. Landlords are utilising their property portfolios to access the equity they have accumulated to, in turn, add to their portfolios. Those Hampton figures

show that the average landlord who sold in England and Wales last year achieved a sale of £82,450 (or 42%) more than they paid. Now, over that period of ownership they may have already accessed – and leveraged – that equity growth through remortgaging and the like, but it may not stop them doing so again, and neither does it stop those who haven’t from doing it for the first time. Landlords can use this to fund further property purchases, perhaps focusing on those that will deliver potentially more yield, such as houses in multiple occupation (HMOs) or multi-unit blocks (MUBs), or utilising limited company vehicles in order to do so. Prices have tended to increase recently, and landlords might not feel now is the time to do that, but again this doesn’t necessarily mean they are waiting to sell, rather than waiting to buy. We’re all acutely aware that housing supply in this country has tended not to change too much, that the pandemic has potentially shifted the needs of tenants, and that in the future there could be opportunities in different parts of the country for different types of property, based on those economic and societal shifts. Landlords will undoubtedly respond to that, will continue to need remortgage options to access equity, and will continue to need purchase mortgages to add to portfolios. Plus, in further good news, we’re also seeing a significant increase in the number of first-time landlords entering the sector – which is a very important part of boosting PRS supply, because some landlords will sell up and leave the sector and we need new blood in to deal with that. Overall, however, as those sale figures show, landlords are sticking around and looking at the options they have to grow portfolios. The buy-to-let market is very competitive at the moment – in terms of both pricing but also flexibility of criteria – and we at Fleet are responding to that and ensuring our service standards and lending quality remain high. Good news for advisers, and those landlord clients who are often very adept at dealing with all kinds of pressure – whatever it might be. M I www.mortgageintroducer.com

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Specialist lending and the staycation boom Adrian Moloney group sales director, InterBay Commercial

hat do Torquay, Windermere, York, Newquay and Bath all have in common? Sure, they’re all very nice places – some have beaches, others are known for their historical sights, while one or two are famous for their stunning scenery – but they’re scattered all around the country and, at first glance, there doesn’t seem to be anything to connect them. However, with lockdown restrictions slowly starting to ease, people are starting to think about where they might like to escape to for a week or two’s holiday later this year. With foreign travel still largely off the radar for the time being, they’re instead turning their attention to places closer to home, which leads me back to the connection between the places I mentioned earlier. According to a recent survey by Tripadvisor, these are included in the top 10 places in the UK that people have been searching for when looking for the perfect staycation this summer. Tripadvisor’s research has found that the number of travellers searching for British staycations has shot up by 384% in recent weeks compared with the first week in January, with Torquay taking the top spot. Almost half of Brits (47%) say they’re planning to travel domestically this summer, with 44% intending to take two or more holidays and 13% saying they hope to take at least three. Not surprisingly, the sharp increase in the number of people thinking of holidaying in the UK has piqued the interest of investors looking to benefit www.mortgageintroducer.com

from the surge in demand for shortterm rental property. Not only could a holiday let property earn you as much rental income in a single week during peak season as you would in a whole month with a standard buy to let property, the extended stamp duty holiday period means investors could save thousands of pounds in tax. Wanting to buy a holiday let property and securing the mortgage to turn the dream into a reality are two completely different things, however. Many mainstream lenders are reluctant to lend on holiday let properties because of the way they calculate affordability. With most buy-to-let mortgages, affordability is worked out using the annual rental figure for a property being let for 12 months of the year. This can cause problems when it comes to holiday lets, which are rented out for weeks, rather than months, with income often fluctuating depending on the season.

Some lenders will also ask to see evidence of previous holiday let experience, or that a target property has been used as a holiday rental in the past. Fortunately, specialist lenders such as InterBay Commercial are here to help. These lenders have a vast amount of experience in providing bespoke solutions and can offer products specifically designed to meet the needs of investors looking to make the move into holiday lets. Take our new holiday let proposition, which is aimed at personal ownership and limited company landlords. Investors can choose from a range of products and we will calculate rent based on a letting period of 30 weeks a year, based at an average of the low, middling and high season rates. With more people planning to take their holidays in the UK this year, and a corresponding rise in the number of landlords hoping to meet that demand, it’s reassuring to know there are lenders you can turn to. Whether they’re thinking of purchasing a property on the beautiful South West coast or in the stunning surroundings of the Lake District, it’s specialist lenders which are often best placed to help them realise their dreams. M I

Torquay: One of the UK’s staycation hotspots

MAY 2021 MORTGAGE INTRODUCER

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Changing attitudes to green mortgages George Gee commercial director, Foundation Home Loans

reen mortgages are widely expected to become an increasingly attractive option for landlords and owneroccupiers over the next decade. Here at Foundation Home Loans, we are pleased to be among the trailblazers with our Green Reward remortgages. However, questions do remain over how big this market will become, what kind of changes landlords and homeowners are making, and how intermediaries can incorporate this into the advice process. Green mortgages can be a wellconceived concept which represents a viable option for a variety of borrowers committed to improving the energy eﬃciency of their properties. Lenders who understand this commitment are providing access to a green product which delivers a competitive rate, often with a reduced fee or a cashback amount. Focusing on its impact on the buy-to-let (BTL) market, research from Mortgages for Business recently highlighted some changes in attitude toward this product type from the landlord community. The results of the poll, which surveyed more than 300 landlords across the UK, found that 62% of landlords would describe themselves as ‘interested’ in green mortgages. This figure demonstrates a marked rise, as only 10% of those who had acquired their first BTL property in the 2000s said they had been interested in green mortgages when making their investment purchase at that time. Somewhat surprisingly, younger landlords were suggested to be less

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interested in green mortgages than their elder counterparts, with 50% of those under 45 expressing an interest, compared to 66% of landlords over 45 years old. The poll also revealed that 15% of female landlords were interested in green mortgages when they first started investing in property, compared to only 7% of men. However, this has since risen to 56% of female landlords, and 64% of male landlords. Talk of climate change and a range of environmental issues has been around for many years. Thankfully, this has evolved to generate wider discussion and action in more recent times, and it’s great to see the landlord community embracing change.

“Green mortgages remain niche, but competition should be encouraged” On a wider scale, we know there is a firm commitment in place to make Britain a carbon neutral nation by 2050. Upgrading the UK’s existing housing stock to make homes across the country more energy eﬃcient will play an integral role within this. The self-build and new-build markets have seen constant improvement when it comes to incorporating more environmentally friendly concepts, energy eﬃcient methodologies and unique construction types across a variety of builds. This also applies when it comes to updating older properties, and it’s always interesting to see exactly where such improvements are being made. Late last year, research from plumbing and heating trade supplier City Plumbing revealed that the majority (84%) of homeowners were planning to make their properties

greener in 2021, with reducing energy bills being a key motivation. In addition, nearly a third (31%) of homeowners think that eco improvements could make their home more comfortable for them and their family, whilst a quarter (27%) believe it would make their property more attractive to prospective buyers. The most popular energy efficient home improvements were loft insulation (21%), followed by cavity wall insulation (20%), solid wall insulation – internal or external (17%), under floor insulation (16%), radiators (13%) and underfloor heating (12%). Furthermore, a report from Rated People highlighted that 57% of UK residents said they wanted to be more eco-friendly in 2021 – whether that’s by recycling more, eating less meat, or making their homes eco-friendlier or more energy efficient. In 2020, uPVC windows and doors, roof insulation and solar panel installation were among the top 15 eco jobs posted on the Rated People website. In addition, 11% of homeowners said that they planned to make their homes more energy efficient and eco-friendly in 2021, compared to 9% who made improvements last year. Lenders are swiftly realising these changing attitudes. Here at Foundation Home Loans, our residential and buy-to-let green products have been designed to provide a specialist mortgage solution to those homeowners and landlords who have made energy efficient improvements to their properties, and who deserve to be rewarded for their endeavours. This is an ethos which is already generating a strong level of interest from borrowers and intermediaries. Green mortgages remain something of a niche sector, but competition within the lending arena should be encouraged if real change is to happen. Whilst we might not see the ramifications of the green mortgage movement overnight, this is part of a longer journey which will see more borrowers, intermediaries and lenders embrace environmental issues and see them become an integral component within the mortgage and housing markets. M I www.mortgageintroducer.com

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Optimism speaks for itself Ying Tan founder and chief executive, Dynamo

’m writing this following the opening up of some COVID-19 restrictions. You certainly don’t have to look far to see gym visits, much-needed haircuts and a variety of shops and businesses opening their doors, with a rising sense of optimism. Yes, we have to remain careful and cautious – and there is still some way to go in escaping this terrible pandemic – but it’s encouraging to see that there are a growing number of reasons to be cheerful as we enter the summer months of 2021. This optimism is also evident across the wider economy. The latest data from the Office for National Statistics (ONS) showed that the UK gross domestic product (GDP) is estimated to have grown by 0.4% in February 2021, as government restrictions affecting economic activity remained broadly unchanged. The service sector grew by 0.2% in February 2021, as wholesale and retail trade sales picked up a little but, overall, consumer-facing service industries understandably remain well below prepandemic levels. Output in the production sector rose by 1.0%, while manufacturing grew 1.3% following a slight contraction in January. The construction sector also saw a rise of 1.6% in February, driven by growth in both new work and repair and maintenance. These are important figures, as they offer some sustained hope in the wake of strong vaccine numbers and a belief that, generally speaking, the economy has held up relatively well during what remains a challenging period. The housing and buy-to-let (BTL) markets also continue to perform strongly, with households and individuals who have managed to save

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over the past 12 months still looking favourably at the UK property market, whether this be via investing in their existing homes, buying properties or adding to their portfolios. That’s not to gloss over the industries, businesses and individuals who have struggled or are struggling, but we have to continue driving forward where possible. When it comes to continued BTL impetus, it was great to see data from Paragon Bank suggest that BTL business over the coming year is expected to hit a seven-year high, with an estimated 50% of brokers anticipating higher levels of business over the coming year, and 21% expecting transactions to increase by 10% or more.

“An estimated 131,900 properties were sold by landlords in 2020, the smallest number since 2013” This represents an uptick in optimism, which dipped slightly in Q4 2020, when a total of 41% of intermediaries forecasted more business over the year ahead. A significant driver behind this positive outlook is the demand for buy-to-let mortgages currently being experienced, with just under half (47%) of brokers stating it is either ‘very strong’ or ‘strong’, up from the 44% reported in the final quarter of 2020. The proportion of intermediaries experiencing ‘weak’ or ‘very weak’ demand, meanwhile, was reported to be the lowest since before the start of the COVID-19 outbreak, at just 12%. We know that BTL is viewed as a long-term strategy for the vast majority of landlords, but it’s always reassuring to see that this commitment has remained evident throughout some highs and lows, and that the future remains bright. This long-term strategy and commitment are further demonstrated

in research from Hamptons, which outlined that an estimated 131,900 properties were sold by landlords in Great Britain in 2020, the smallest number since 2013. Focusing on the longevity of property ownership and capital gains, the research suggested that landlords who sold last year in England and Wales did so for an average of £82,450 (42%) more than they paid, and had owned the property for an average of 9.1 years. The average gross gain increased by £3,390 (4%) to £82,000 compared to 2019 (£79,060), marking the first annual rise in more than five years. On a regional basis, London landlords were reported to have made the biggest gains, selling on for £302,200 (71%) more, having owned the property for 9.8 years on average. Despite the increase, typically landlords who sold in the capital last year made a smaller gross profit than those who sold in 2016, when they made an average gain of £364,960. The top 10 local authorities where landlords made the biggest gains were all in the capital. Kensington and Chelsea topped the list last year, with the average landlord selling for £784,980 more than they paid 10.6 years earlier. Landlords in the North East continued to make the smallest gains; the average landlord made £11,310 (16%) capital gain, having owned for 8.0 years. This number of landlord sales represents a seven-year low, which is an impressive statistic. To maintain a little perspective, it’s prudent to consider the eviction ban which was in place for much of 2020, and which impacted the ability of some landlords who may have otherwise chosen to sell. However, from speaking to our landlord clients, it’s clear that for those who have successfully navigated recent tax and regulatory changes, the vast majority still view BTL as a sound long-term investment vehicle. There is little reason to suggest that this thinking will change anytime soon. M I www.mortgageintroducer.com

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Going green in buy-to-let Jane Simpson managing director, TBMC

n recent years, the environmental issues affecting our planet have taken central stage in the media, and many people have become increasingly concerned with their own carbon footprint. There are many ways in which individuals might modify their lifestyles in an attempt to help fight climate change and protect Earth, such as switching to green energy suppliers, reducing international air travel, or using public transport and cycling. There have also been incentives provided by the government by way

of the Green Homes Grant scheme to help homeowners make their properties more energy efficient, although applications closed on 31 March 2021. This scheme was also available to residential landlords, who could benefit from improving the Energy Performance Certificate (EPC) rating for the properties in their buy-to-let (BTL) portfolios. MINIMUM EFFICIENCY

Since 2018, landlords have been required to comply with the Minimum Level of Energy Efficiency standard, which sets a minimum EPC rating of band E for residential rental properties. From April 1 2020, landlords are now no longer allowed to let any properties that fail to meet this minimum standard, and may face fines for non-compliance.

There have also been recommendations to government by the Climate Change Committee that all homes in the UK should have an EPC rating of at least C by the year 2028, so there is rising pressure to improve the energy efficiency of housing stock in the UK to help fight climate change. There is clearly motivation for landlords to make improvements to the energy efficiency of their portfolio, and it seems that some buy-to-let mortgage lenders are showing their support for environmental concerns by offering incentives for properties with a better energy performance rating. Paragon Bank recently launched a range of green BTL mortgages for properties with EPC ratings from A to C. These products offer lower deposit options of 20% – 80% loan-to-value (LTV) – compared with a minimum deposit of 25% – 75% LTV – for less energy efficient properties. FURTHER ADVANCE

There are mounting efforts to improve the energy efficiency of UK housing stock

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Paragon also offers a green further advance product to help landlords make improvements to properties with an EPC rating of D or below. Similarly, TMW is offering a green further advance product for making energy efficiency upgrades. Other green BTL options include Foundation Home Loans, with a Green Reward remortgage product for applications where sufficient energy improvements can be demonstrated, and Keystone Property Finance, which launched a green BTL mortgage in April, which offers a 15 basis point reduction off the core range for properties that are five years or older with an EPC rating of A to C. As there are mounting efforts to improve the energy efficiency of the UK’s housing stock, landlords are playing their part – either by choice or obligation. There may also be more pressure on lenders to ensure that properties on their books meet the EPC requirements, so green incentives make sense for all parties involved. M I MAY 2021 MORTGAGE INTRODUCER

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Surely advisers aren’t snollygosters? Kevin Carr chief executive, Protection Review; MD, Carr Consulting & Communications; co-chair, Income Protection Task Force

‘snollygoster’, with thanks to Susie Dent on Twitter, is an individual who is guided by personal gain rather than by principles. As an ex-adviser, I always presume that other advisers are good at what they do, even great. I have an automatic, in-built assumption that advisers only ever do the very best they can for their clients, placing their own, or anyone else’s needs, second at best. I’ve either met, worked with, or trained well over 1,000 advisers over the years, and would consider many to be close friends.

“To weed out occasional bad apples, many insurers have developed data and intelligence systems to closely monitor a range of factors” Within that circle, we are often experts who can argue about the fine details of policy wordings, or the latest controversial issue in the market, often for hours on end. When it comes to clients, the advice from an adviser is always accurate and authentic – and potentially life changing – and many advisers also help the industry to address a range of issues, from improving the customer journey all the way through to paying more claims. I’m sure this is the case for the majority of advisers in the UK protection market, who provide incredibly good levels of service and

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advice to many thousands of people every day. However, it’s not quite always the case. The quality of protection advice in the UK varies across different firms and different types of distribution. There are a few firms – and sometimes individuals within good firms – which sometimes aren’t great, or even good. To weed out these occasional bad apples, many insurers have developed data and intelligence systems to closely monitor a range of factors. In extreme situations, agencies are closed. The early warning signs may include: poor persistency – policies being cancelled in the first few months or years; the volume of early claims; frequent non-disclosure; the business mix across clients and products; and the financial model and commission structure of the business. There are firms which allegedly seek to lead customers into believing they are calling from their existing broker, when they are actually a different company trying to get the customer to switch their cover. There are also those which try to persuade customers to act against their own best interests, while providing a ‘non-advised’ service. Thankfully, such snollygosters are few and far between. M I

NEWS IN BRIEF Premier Choice Group and The Insurance Surgery have joined the Protection Distributors Group, which was set up in 2016 to help adviser firms drive positive change in the protection market. Legal & General paid out a record 43 personal protection claims every day in the UK during 2020, totalling £763.9m – a yearly increase of £32m – and benefitting 15,855 customers and their families. SimplyBiz has launched an online protection hub designed to draw together compliance, training, outsourcing and research support. The Association of British Insurers is hoping to train thousands of advisers on mental health awareness by the end of the year. iPipeline has seen protection sales figures through its adviser platforms increase during the first quarter of 2021, with new business up 10% and like-for-like business rising by 7%. According to the latest figures from The Exeter, COVID-19 was the single most claimed for condition in 2020, representing nearly one-third (32%) of income protection claims. MetLife research found it takes a drastic change, such as illness or accident, before many homeowners consider protection to help with mortgage repayments.

2020 protection sales down

ccording to the latest report from reinsurer Gen Re, the UK protection market was down by around 8% in 2020, compared to the previous year. The COVID-related slump impacted most product lines in 2020, although term assurance sales remained flat overall, most likely linked to the housing boom fuelled by the stamp duty holiday. Critical illness sales were hit by the COVID-19 pandemic, down almost 13%,

while income protection sales – the fastest growing segment of the market prior to 2020 – paint a similar picture, with sales down by 15%. The report also found there was a large initial uptake of policies in March 2020 – up 43% from February – when the uncertainty surrounding the pandemic was arguably at its height, and that it was not unexpected to see volumes drop as the year went on.

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Keep the innovation coming Mike Allison head of protection, Paradigm Mortgage Services

e have all heard the phrase, ‘necessity is the mother of invention’, effectively pointing to the supposition that when things are needed, someone – or some corporate entity – steps up and delivers. History shows us that in some instances this is true. As relatively recently as the 1940s, extra effort was put in by scientists Alan Turing and Barnes Wallis to aid the war effort – arguably, without the need at the time their inventions would either never have been created or they would have arrived some time later. Many would have seen them as innovators who developed some finite physical object that did a specific job, and not necessarily for profit, but at that particular time the ‘value’ of the object was almost incalculable. Clearly we’ve recently had scientists all over the world trying to formulate a response to COVID-19, and thankfully their collective efforts have resulted in a vaccine that, while it does have a cost, also has a value that is almost too great to calculate to mankind. If you Google ‘who are the world’s innovators?’, Nikola Tesla, Bill Gates and Steve Jobs appear in the Top 12, and yet you could argue their innovations were more design – taking things that already existed and developing something that the world didn’t know it needed until it arrived. Why, you might ask, am I talking about innovation in an article looking at protection? Well, as a aresult of the pandemic, what we have seen from protection providers is a reaction to a situation, which included the redesign of a number of processes in order to try to make life easier for advisers in a pretty tough market. www.mortgageintroducer.com

In some instances, ‘risk’ committees have met daily to re-engineer processes to make it easier when writing life cover – and all the other key products – by extending the boundaries. Increasing medical limits, taking underwriting information from hospital outpatient records, and underwriters physically talking to clients about specific ailments and medicines, are just a few examples of this pushing back of boundaries. In many instances, these decisions have been taken over Zoom and Teams. Incidentally, that technology has existed for some time, but we just didn’t see a requirement to use it. In some instances being remote may have made the decision-making harder, or at least less comfortable, than if the same people were taking decisions sat around a table in the same room with different levels of interaction. Providers are to be applauded for their stances in doing everything they could to keep the doors open for business at a time when the general public wanted or needed solutions to the pandemic in the form of insurance. The plea is that, having arrived at this level, the boundaries continue to be pushed back.

Product innovation is key to pushing the boundaries

Innovation and insurance aren’t generally words that go together in the same sentence, but these processes will be instrumental in the success of the market moving forwards. The Apple iPhone wasn’t an invention in itself. It took existing technology and ‘packaged’ it in such a way that appealed to people so they no longer had to use a photo album, buy a video camera, etcetera. That ‘packaging’ appealed to the extent that 2.2 billion had been sold worldwide by 2018, at which point they stopped counting. By amending the processes we use in the insurance sector, we can start to have the same effect on the sale of life, critical illness and income protection products in the UK, in turn helpig to lessen the much talked about ‘protection gap’. Third-party suppliers have supported industry growth by making it easier for advisers to carry out business. Our own experience with iPipeline’s Solution Builder has shown this to be evidently true. However, with the evolution of artificial intelligence and existing technology, there must be ways in which the industry can attempt to push back the boundaries even further, making it easier for customers too, whether this is in the underwriting process, the claims process or the product marketing processes. We have seen from the various claim statistics in the past couple of weeks, both in percentage and volume, that our industry plays a huge part in helping people through crises, both financially and mentally, if added-value benefit statistics are to be believed. What we need to do is to help more people with the products and services we provide, at a time when the need is greater than it as ever been. The message to insurers, therefore, is this: don’t take your foot off the pedal now that the pandemic is coming to an end – in the UK at least. Continue to push the boundaries, and visualise them as if they still existed. M I MAY 2021 MORTGAGE INTRODUCER

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PROTECTION

Protecting the sandwich generation Ross Liston managing director, distribution Sesame Bankhall Group

stimates suggest there are at least one million Britons who are financially responsible for both their younger and older family members. The likelihood is that this so-called ‘sandwich generation’ is only going to grow further as couples leave it later to have children and the older generation lives longer. Having this dual financial responsibility makes it even more important for people to consider how their loved ones would cope if they were to become seriously ill or die. There’s a wide range of protection insurance options available to help clients and give them the peace of mind of knowing their loved ones will be looked after – the question is whether advisers are giving this enough focus in their regular conversations? So, what are some of the ways that advisers can incorporate protection into their customer conversations? Here are some suggestions: 1. Tackle any misconceptions around cost and promote the value of protecting assets, income, and health as the foundation for any financial plan. Help clients understand how protection fits into the bigger picture of their financial wellbeing. 2. Remind customers that age is just a number. Lots of people feel that becoming seriously ill isn’t something that will happen to them. However, the reality is that long-term illness can strike at any age, and there’s plenty of statistics available with which to back this up. 3. Statistics can also be helpful in demonstrating the high percentage of

claims that are paid each year, which is a useful tool in dispelling any negative perceptions a client might have. 4. Setting realistic underwriting expectations is important, as one of the common reasons clients do not go through with an income protection application is when an insurer raises the quoted premium due to a health or lifestyle factor, which the client was not expecting. 5. Consider all the available options. Whilst income protection policies offer relatively cheap premiums for those who are young and in good health, a comprehensive long-term product

isn’t going to be within every client’s budget. However, product innovation means a solution is almost always available, so what’s the next best thing? 6. Protection sales have traditionally focused on people who own their home, but data shows that a fifth of the 27 million households in the UK live in rental properties. There’s been a steady rise in the number of professionals with families living in rented accommodation, so it’s important to take a broad view. The impact of COVID-19, combined with changing population trends – such as interdependent family units spanning several generations – are leading to changing consumer needs. This is where the role of professional advice becomes more important than ever. It’s an opportunity for financial advisers to help restore protection to its rightful position as the foundation of sound financial planning. M I

Dual financial responsibility requires careful consideration of protection needs

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GENERAL INSURANCE

The disappearing phone line Claire Fletcher PR, Safe & Secure

o online, they say, it’s so easy! But the amount of questions and the time involved in going online for all products and services can make it tiresome. I know from personal experience how difficult sorting queries can be, especially with household administration, including finances. utilities and healthcare. After sitting on a computer for most of the working day, the last thing I want to do in the evening is visit comparison sites for financial advice. It would be refreshing to be able to pick up the phone and speak to an industry expert without waiting in an automated queue for 30 minutes – as happened last week when calling my bank. Or better still, request a call back at a time that suits me. I have also noticed that an increasing number of the companies we deal with on a professional basis have taken the contact details off invoices, statements, and general admin paperwork. It has become increasingly difficult to have a one-to-one conversation, and as a result, something that could be sorted in a quick phonecall takes weeks to resolve by email, with response times at a minimum of 48 hours, and more commonly taking seven days. The service level agreement (SLA) times are now so long I need a diary to track them. Just the other day, I was told that if I hadn’t heard back in six weeks, to contact a business again. Without a diary, in six weeks I will have forgotten what on earth I wanted in the first place, let alone remembering to contact them again. It also puts me off sorting simple tasks, knowing that any query is a battle and anything slightly different from the standard becomes a ‘computer says no’ scenario.

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I would celebrate the return of the phonecall. A mortgage broker is in an ideal position to encourage this and build upon things like mortgage, life and buildings and contents insurance by working with a panel of quality contacts to expand their service offering. Let’s return to the days of the financial adviser becoming a oneperson band, with a close working relationship servicing all the client’s needs they can manage. It is important to offer all levels of contact options to customers. It’s great to be able to pick up the phone and speak to someone quickly, whilst also having all the different technology options, as some people do thrive on sorting things online. For those people, however, please understand that if you don’t answer the online questions correctly, you could invalidate your insurance, even though you may not understand the implications of the questions. Let’s

be honest, only an expert can explain some of the technical terms used. So, lets move forwards from the self-service option to a quality advised service with a real person over the phone. Someone who can build the right level of cover and make sure your new bike, engagement ring, art collection, or lockdown model building hobbies are taken into consideration and the sums are correct. If a claim is made and you are underinsured, the insurer usually scales down the cover of the policy so say you were only 80% covered for your contents, and may only pay 80% of your claim. Use an award-winning provider and refer your clients to be called by a qualified person at a convenient time, to purchase insurance to safely cover their biggest asset – their home. Let’s make things easy, go back to customer service and actually answer with a ‘Hello, how can I help?’ M I

Hanging on the telephone?

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GENERAL INSURANCE

Approaching the peak? Geoff Hall chairman, Berkeley Alexander

or the last two years, the insurance market both in the UK and globally has been hardening at a rate not seen for 20 years. Insurer capacity is restricted, premium rates have increased, policy coverage is narrower, and insurers are being highly selective regarding the risks they choose to insure. This has come from a combination of factors, including insurers and their reinsurers experiencing increased and sustained catastrophe losses in recent years, double-digit annual claims inflation across many lines of business, and historically low investment returns on premium income due to extreme volatility in the wider economy. With premium levels prior to 2018 at a historical low, due to a soft and highly competitive market, there was inadequate risk funding to allow insurers to both pay losses and remain profitable. We are now experiencing a major correction of the market. Additionally, a strict Lloyd’s of London performance review has led to the closure of many Lloyd’s syndicates. Even before the market began to turn, there was unparalleled mergers and acquisition activity consolidating a number of major insurers looking to reduce costs with economies of scale. With insurers and brokers working remotely, the ease of reviewing risk information, visiting sites for surveys, communicating with insurers – especially in Lloyd’s, presenting clients to the market and so on are all more challenging. Technology is adapting quickly, but these changes to working practices are restricting brokers’ ability to negotiate effectively in an already very challenging market. However, the insurance workforce, including Berkeley Alexander, is also beginning to return to the office.

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We’re returning in a phased approach, but we took residence in our new, bigger and more modern offices in April, and it’s fantastic to be back! There is also evidence that pricing in the UK is beginning to plateau for the most attractive and profitable lines of business now that risks have been through at least one renewal in a hardening market. For the UK, it has been a hard market in more ways than one this year, but have we reached the peak?

struggle with their mortgage, as some UK lenders have withdrawn lending to such groups. The Association of Mortgage Intermediaries (AMI) wrote a factsheet for brokers in December last year warning of problems for EU-based borrowers who also owned a property in the UK, and brokers too may face difficulties helping clients based in the EU. The problems stem from the ending of financial services passporting arrangements allowing UK banks and

BETTER TOGETHER

According to estate agent Hamptons, a record number of landlords decided to incorporate and become a limited business in 2020. There were more than 40,000 buyto-let (BTL) incorporations in 2020, an increase of 23% on 2019. The numbers have more than doubled since 2016, rising 128%. Limited company status is growing in popularity, particularly for portfolio landlords, as the phased reduction in mortgage interest tax relief does not have an effect on limited company landlords, who can continue to offset mortgage interest against profits, which are subject to a corporation tax of 19% instead of income tax rates. From a general insurance (GI) point of view, it’s important to remember that arranging separate general insurance policies on each property in a portfolio isn’t cost effective, and a single block policy may well serve the landlord better. A block policy can cover standard and more complex non-standard risks under one policy. It’s a win-win, as they are invariably cheaper than separate policies and much easier to manage – a time saver that I am sure clients will thank you for. EXPAT GI ISSUES

There are fears in the market that some expats could become mortgage prisoners as an impact of the Brexit trade deal. Anyone living in the EU who owns a UK property could

“For the UK it has been a hard market in more ways than one this year, but have we reached the peak?” building societies to trade freely in EU states. Without these arrangements, lenders will need to apply for a licence in the relevant country, and the same applies to GI. The issue for GI has further been compounded by the pandemic. For those UK nationals with property abroad – and who have been living in the UK during the pandemic – their overseas properties have largely been abandoned and unoccupied during this period. The same applies to any UK national living in the EU currently but with property left unoccupied here. Not everyone will have local contacts who can check on the property from time to time and keep it safe. The potential risks here from an insurance point of view are clear, and should a claim arise in these circumstances there’s no guarantee a policy would respond. Most policies will require regular inspections of properties left unoccupied for lengthy periods of time. Whilst you would expect insurers to be flexible currently, most will expect owners to do everything they can to prevent a claim, even under these difficult circumstances. M I www.mortgageintroducer.com

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EQUITY RELEASE

A new era of protection Claire Barker managing director, Equilaw

s the demand for later life lending options continues to soar amongst property owners in the UK and the forces which drive this demand become more diffuse or engrained, the need for a code of practice which is capable of delivering high standards of customer service and protection has become increasingly apparent. Almost 95% of respondents to the Equity Release Council’s recent member census agreed that the implementation of recognised industry safeguards are essential for stimulating trust amongst consumers and of emphasising the safety and reliability of equity release products. PROFESSIONAL STANDARDS

To this end therefore, the Equity Release Council has chosen to mark its 30th anniversary by launching a member endorsement mark; a scheme which is designed to promote professional standards of service care and advice at all stages of a transaction. Members will be allowed to adopt the new endorsement mark straight away (or as soon as is practical), with an extended grace period allowing those who need a longer period of adjustment to use the previous logo until the end of the year and will provide a much needed footing for unified principles of integrity, security and protection across the 586 firms and 1,454 individuals that currently comprise membership of the ERC- a figure which is growing exponentially with every passing year. Moreover, the scheme represents the culmination of an intense process of consultation and strategic planning by the ERC and has been prefaced by a number of individual publications, appointments and platform launches www.mortgageintroducer.com

designed to improve services and protect the interests of borrowers. For example, both the ERC’s Best Practice Guide and its accompanying advisor checklist have been revised to counter FCA criticisms of minority practices within the advisory process by ensuring that case files capture sufficient detail to support recommendations and that services are quality driven and personalised. Indeed, under the terms of these documents, advisers are now encouraged to gather so-called soft facts (such as the beliefs, opinions and feelings expressed by customers) and to record their clients’ use of language in order to ensure that advice and product recommendations are commensurate with individual circumstances and that endorsements are underpinned by sufficient supporting evidence. The guide also emphasises the need to challenge the motivations, assumptions or preferences of customers in order to identify financial solutions that work on a short, medium and long-term basis and thereby remove the possibility of recommendations being dictated by a box-ticking or standard paragraph approach. As a result, the adviser checklist has now been extended from 12 to 24 points so as to offer a safer and more “consistent” standard of advice and to help advisers identify evidence of vulnerability, trauma or financial difficulty at an early stage. It emphasises a joined-up and holistic approach which takes all factors and financial possibilities into account while offering a considered and (above all) secure attitude to customer needs and circumstances, particularly when coupled with the role of independent legal advice. ADVISER SKILLSETS

In addition, advisers will now be trained and supported as part of the ERC’s new competency framework; an educational platform which tracks the development of adviser skillsets via in-depth syllabus modules covering

knowledge and understanding of the industry, markets, clients, soft skills, products and processes. These modules, which have been developed in tandem with specialists and experts from across the sector, are split into three distinct pathways and have been designed to reflect each adviser’s level of experience, thereby differentiating between those who have recently entered the industry, those who are currently advising under supervision and those who have achieved the highest standards of competency. This in turn, allows both firms and individuals to identify areas of knowledge which require greater attention while also ensuring that service standards evolve to meet the needs and requirements of all borrowers, regardless of background or circumstance. In other words, good for the industry, great for customers. Furthermore, the entire endorsement package will be overseen by the ERC’s new risk, policy and compliance team (which has been tasked with ensuring that Council Standards are implemented and maintained across the industry and that consumerfocused protections are upheld), as well as a Legal Forum which will educate advisers, funders and fellow professionals on the vital role of legal advice within the sector and evolve existing legal standards to ensure that they keep pace with the needs and interests of consumers. In short, these two bodies represent the icing (as it were) on an exhaustive and meticulous package of reforms that address and improve each aspect of the application process, while ensuring that customer outcomes remain safe, considered and relevant. They should be regarded as of self-evident importance to even the most vociferous critic of ER and as an achievement for which we within the industry should be justly proud; the beginning of a bold new era of responsibility and protection. M I MAY 2021 MORTGAGE INTRODUCER

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EQUITY RELEASE

Changing the perceptions Andrea Rozario chief corporate officer, Bower

here’s always a risk when talking about a rather specific, somewhat niche part of a broader industry that you create an echo chamber for yourself. I often wonder when writing these columns, what does the regular Joe really think about equity release? Does the average man on the street really know much about our industry? I doubt it. To hit the heights I know we can, reversing this trend must be at the heart of everything we do. There has been a huge growth in the awareness of equity release in the past decade, but we need to push the accelerator and go much further. What do you think most people would say if they were asked about equity release? I imagine many would still think our business hasn’t changed much in the past 20 years. For those that do back themselves as being clued up on the lifetime mortgage, I’d bet most would trot out the classic ‘expensive last resort’ line. Luckily, I think responses would be very different if you asked actual equity release customers, and we would get a more even-handed review. But herein lies the problem – the average person, namely the average potential customer, only becomes fully educated on equity release after they get involved, so we need to make sure they know more before they even meet an adviser. For instance, would most realise that a number of equity release products now let you service the interest? According to the most recent Equity Release Market Report, distributed quarterly by the Equity Release Council, interest servicing features on new products have risen by 80%. The rise of this feature has made modern equity release almost

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unrecognisable from the market of just a few years ago, but we need to let the people know! What about making voluntary or partial payments? Again, this is another feature that I am pretty sure most people would think is not a perk of equity release. And yet, this too is on the rise – up 65%. The industry in 2021 is always looking to give our customers choice and options, so now we need to make the prospective customer well aware of this too. Speaking of choice, I would love for more people throughout society to know that equity release isn’t some kind of monolith. There is so much choice now. In fact, the variety and choice available in modern equity release, especially recently, is staggering. There are more than 300 different products available, and in just the last year choices for customers have increased by 42%. This has been a trend over recent years, and I can only foresee this continuing and choice growing and growing. Finally, what about people’s fears and anxiety about using equity release? We have had to deal with a lot of myths and misnomers over the years, and there is still a distance left to

We need to go much further

travel here. Not enough people know about safeguards that form the bedrock of today’s equity release industry – things like the No Negative Equity Guarantee, for example, need to be better understood prior to any first adviser meeting. But there are also other safety nets and protections, like the Inheritance Guarantee that forms a part of so many new plans, which again is another feature on the rise, with 20% more lifetime mortgages offering this protection year on year.

“There has been a huge growth in the awareness of equity release in the past decade, but we need to push the accelerator and go much further” Ultimately, equity release is still a fringe concern and the general population are not clued up enough. But they are getting there. This has been a battle of attrition, and I imagine it will continue this way, but I can feel the mood changing. Just seeing ads on TV for equity release proves we are knocking on the door of mainstream acceptance, but we need to continue banging the drum. The over-55 population is set to increase by three million over the next 15 years, so many more people will be looking at options like this. Giving them all the facts and all the information they deserve to make their own choice is the most important thing for everyone. If we can get to a place where the lifetime mortgage is talked about in the same breath as a traditional mortgage, we will be on the right road. Once this happens, our little fringe industry will get to the level I know it deserves and needs to be at. Righting wrongs and educating people whenever we can has to be the way we get there. M I www.mortgageintroducer.com

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EQUITY RELEASE

Making the most of marketing Stuart Wilson CEO, Air Group

’ve lost count of the number of times I’ve spoken to advisers who have been concerned about their levels of later life or equity release business, their leads, their income levels, their work pipeline, especially when comparing any given period with one from a previous year. They often want to know how they can replicate that excellent period again, to which I always ask, what was the marketing activity they were conducting back then? Because, of course, if you can look back and take a view on what part of the marketing mix worked most effectively back then and brought in the most or best business, then it makes sense – if you’re not already – to try and repeat that. Indeed, while there is no one marketing activity that will necessarily deliver excellent results every single time, there are those that work better for different firms, and my view is that you ‘repeat, repeat, repeat’ not only to find out which works best, but to ensure that no stone is left unturned. The answer normally comes back from the adviser concerned that they’ve actually been too busy to carry out any marketing activity recently, let alone those tasks which are likely to have contributed to them repeating that previous excellent business period. Therein lies the problem for many advisers, especially small to medium enterprise (SME) businesses, not just in the later life space but right across the advisory horizon. Marketing might seem to be a series of tasks that can be jettisoned whenever you’re busy, but there’s www.mortgageintroducer.com

obviously a very strong argument to suggest it should always be one of the most important tasks, regardless of whether the business is flooding in or you’re in a less than busy period. At our recent ‘Breakfast with Stuart’ event, our head of distribution, Ray McCarthy, presented on the marketing opportunities there are for later life advisers and firms. What always strikes me about this part of business is just how uncomplicated it tends to be.

“The most important part of marketing is to actually do it regularly” There is a lot of mystique around ‘marketing’, particularly in these high-tech days, but the fundamentals are rather simple: focusing on the messages you want to get out there, the targets you want to cover, the tools by which you do this, and measuring the effectiveness of those different parts of the marketing mix. As it tends to be with all these things, the most important part of marketing is to actually do it regularly. As Ray mentioned, setting aside a certain amount of time each week to work on marketing is going to be infinitely better than blasting it once every six weeks and hoping it works. Regular and often is the name of the game, because if you don’t set that time aside, then the likelihood is that you’ll find something else to do or something will pop up that appears to take precedence. So, putting aside that time to work in this area is crucial. Then it does come down to where you want to focus your resources, who you want to focus on – introducers, direct to consumers, other advisers – the methods by which you want to contact them, and the messages that you want to send.

At the start of course it’s important not to miss out anyone or anything that might be able to bring business in. Often, marketing can deliver some very surprising results from some surprising sources – ones that you may have tried on a whim speculatively and which, at the time, you thought might not deliver anything. Others, which you were convinced were going to work, might illicit next to no response. The important thing is to try them more than once, measure their success – or otherwise – and then you can make a much more informed decision about whether you should continue in this vein. As mentioned, one-hit wonders are highly unlikely to work – Ray talked about the ‘rule of seven’ in marketing, where a communication often has to be seen seven times before it is acted upon. If you cut every option off at the legs immediately, then nothing is likely to work. Work on your key messages. What is likely to work with mortgage advisers – how you can help the ‘Bank of Mum and Dad’ access cash to help their offspring onto the ladder? What might work with solicitors? How can you help divorced couples with their financial issues? What about consumers – are they going to want to hear about equity release products or instead about the things they can do with money released from their homes? Each message should be targeted. Finally, money. If you’re budgeting for thousands of pounds when it comes to your marketing activity, you’re doing it all wrong. Email communications, online newsletters and targeted websites do not cost the earth, and are often the best way to get through to people. For example, if you’re planning what could be very costly seminars to get in front of consumers directly, think about whether that money might be better spent targeting potential adviser introducers, who are far more likely to see a steady stream of potential later life clients, than you will in a seminar. One-off hit, or constant communication? I know which I would go for. And if it works – keep doing it. M I MAY 2021 MORTGAGE INTRODUCER

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EQUITY RELEASE

Advising on complex cases Alice Watson head of marketing and communications, Canada Life

t hardly needs repeating that equity release can be a complex process, often requiring the close cooperation of several players – client, adviser, product provider and often multiple teams of solicitors. The communication between each party needs to flow freely and openly, and the benefits should become clear early on as obstacles are identified. Realistically, it is becoming rarer to handle the relatively ‘vanilla’ cases that dominated 10 years ago. Relatively common areas for complexity can be, for example, if the client is looking to

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buy a new-build, lives in a leasehold property, or is using a solicitor team that’s inexperienced in equity release. It is becoming increasingly common for clients to use equity release to purchase a new-build property, as they can move in relatively easily without having to worry about renovations or building work. However, admin and paperwork can take much longer, as developers, unfamiliar with the equity release process, can easily overload the solicitor team with paperwork for the whole development, rather than the property in question. In these cases, using a solicitor that is confident in equity release or attached to the development can be invaluable. Developers often also set a 28-day limit within which to complete. While clients may be unwilling to push back for fear of losing an existing deal, a

more experienced team can often negotiate extensions. Leasehold properties require a different process to freeholds, and there are some key questions which, if left unanswered, could lead to serious obstacles at crucial points. It can take time for solicitor teams to check through lease contracts thoroughly, and longer if any corrections are required. it is important to make sure clients are aware of this, and of the documentation required from them, such as ground rent and service charge receipts. It is also important to check how many years are left on the lease, as shorter lengths can sometimes cause an issue. As ‘vanilla’ cases become less common, it is essential we all understand the pitfalls, and how to navigate around them. M I

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SURVEYING

100 days in Xxxxxxxxxx Steve Goodall chief executive, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx e.surv

’ve recently completed the first 100 days in my new role at e.surv. There is a lot to be encouraged by and, as ever, a lot still to do. In my last piece, I outlined the big trends affecting the industry. The past three months have enabled me to see how they are affecting our business and the opportunities they present, coming to a landing place about what lies ahead for us in the context of the mortgage market, and perhaps even beyond. Of course, you can only control the things you can control. Before turbocharging any business, we are doubling down on our efforts to ensure we are making the most of, and delivering the very best of, what we already do. We owe it to our clients and customers to make sure they get the very best products at the best possible price. We must also focus on identifying new opportunities to lend and when to advise not to. Whatever we advise on policies, that ethos must permeate through to the service provided by our valuing surveyors. My early background was in manufacturing, and I am no stranger to time motion studies: measuring the steps of a job, establishing consistent performance, improving procedures, and increasing productivity. I then spent over 15 years in the residential valuation business, implementing a model to deliver just that. Back then, we did not have the scale of resources we have available to us here at e.surv. But as those who know me will understand, this is not just about being efficient or becoming embroiled in a race to the bottom on price. It must always be about quality and innovation, because the world around us is changing all the time, making new demands and creating fresh www.mortgageintroducer.com

opportunities for the valuation and surveying sector. For the sake of our collective future, we have to look well beyond good housekeeping – although that should never be underestimated. We have many experts in this company whose specialist knowledge will, when applied in the correct format, help transform our customer experience and the propositions we can offer to the market. This is important because the insight and output of the surveying profession is relied upon by lenders, brokers, and homebuyers alike to underpin the most important transaction many of us make. We might like to think we can automate everything, but no sooner does one door close than another issue arises that requires knowledge not readily available. We need only look to the launch of the 95% loan-to-value (LTV) government guarantee scheme to see its impact on the demand for physical valuation inspections. EXPERIENCE AND EXPERTISE

Digital is a distribution mechanism that undoubtedly has its place. But it is not a ready replacement for decisionmaking that requires nuance in many niche and higher risk markets. Our experience and expertise should be delivered differently in some areas, and traditionally in others. Appropriate application of digital solutions that meet a need will add value, rather than create white elephants. As a small example of what I mean, look at our UK cladding database. It is a great example of the application of our knowledge and insight that enables a desktop appraisal of any block with potentially defective cladding. Its success rate is over 95%. We are in the process of improving this product by identifying owners, too. The point here is that this kind of proposition delivers information in a way that allows lenders to identify problems as they arise and ones that are already on their back book.

Delliver the best before turbo-charging business

The format may have changed, but the fundamental knowledge and expertise has not. This is true of other propositions, such as our New Build Remote Valuation solution, and the establishment of our climate change team. All these ‘new products’ are built on the backbone of a strong, talented and comprehensive technical surveying and property risk team. The talents of our colleagues do not reside in databases, but are unleashed and leveraged, adding real value to the services we provide. We can extend what we do in our current markets and even introduce those skills into new ones. This is not just about the company we have today – it is about a vision of the company we will have in the future, with specialisms that may not be badged by the Royal Institution of Chartered Surveyors (RICS), but by other relevant bodies, such as those in fire safety, or concerned with modern methods of construction. Ultimately, my challenge is evolving a company that is very successful in the here and now, into one that can meet the demands of the future, too. Our team is rightly proud of what has been achieved here, and we’re very excited about our future. M I MAY 2021 MORTGAGE INTRODUCER

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CONVEYANCING

Supporting brokers that go the extra mile Karen Rodrigues sales director, eConveyancer

irst-time buyers are the lifeblood of the property market. Without them, we simply don’t have a market that works properly – we need these buyers to be able to access that first rung of the ladder so that those who need to move on up to bigger homes are able to sell their own properties. With that in mind, it’s been an encouraging time. There’s no question that borrowers with minimal deposits are in a much better position today than they were just a few short months ago. While the property market as a whole bounced back incredibly from the uncertainty sparked by the pandemic, not everyone has benefited. Lenders had been happy to resume activity with borrowers who boast significant deposits of 20%-plus, but for those hoping to buy with a deposit of 10% or less, things have been more tricky. That is changing, though. It started with the government throwing down the gauntlet with the launch of its Mortgage Guarantee Scheme, where it will take on the bulk of the risk in loans at 95% loan-to-value (LTV). Lenders have responded to that too – barely a day has gone by over the last few weeks without a lender announcing a new 95% LTV range, or at least confirming their intention to deliver products at this deposit point, whether making use of the government scheme or not.

has to be celebrated. It has not been without its challenges, however. After all, it’s one thing for lenders to open up these products, but it’s quite another for brokers to get their cases through. Meeting lenders’ affordability requirements can be tricky at the best of times. Understandably, they want to be responsible about the cases they take on, and put a borrower’s finances through the ringer to ensure they’ll be able to afford their repayments, not just today, but in the future when rates may have increased. Those affordability tests are far more challenging today. Millions of wouldbe borrowers, who in normal times would have sailed through, now have a financial record that has gone through some upheaval over the last 12 months. It might be a period on furlough, or even a job change following a redundancy. The situation can be even more complicated if the borrower is self-employed and has had to deal with reduced workloads as a result of the COVID-19 pandemic. While these challenges are perhaps most acute for those with a small deposit, these affordability hurdles are

AFFORDABILITY CONUNDRUM

As a result, brokers now have far more options for their small deposit clients than they used to – a situation that

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The property market is built on partnerships

present across the board, even for those sitting on much more significant equity. We know that brokers are having to go the extra mile to help their clients overcome these affordability challenges, to meet the lender’s criteria requirements and get their hands on the keys to that dream home. You can’t really underestimate the work involved there. There’s an enormous amount of preparation work required to help those clients to get their finances in order to gain approval from lenders which may remain a little nervous about borrowers in their position. That’s why it’s so important for those of us that work with brokers to follow that lead and show the same level of dedication. Brokers are setting the bar here in terms of what’s required to help these affordability-challenged borrowers access mortgage finance; the rest of us have to meet that standard. PICKING THE RIGHT PARTNER

The property market is built on partnerships. As a result, the hard work a broker puts into helping their client get a successful application together quickly can be easily undone if other elements of the chain drop the ball. It’s because of that risk that brokers tend to think carefully about who they work with – which businesses they partner with for those other aspects of a purchase, like surveys or legals. Finding a partner that understands the extra work a broker is putting in, and which will go the extra mile itself to help get that case over the line, is therefore crucial. In fact, that partner can also help a broker secure the client’s business for years to come, whenever they have a financial issue. It’s something that we’ve focused on a lot at eConveyancer, building relationships with a range of different providers – covering everything from digital wills to insurance – so that brokers can deliver far more than just mortgage advice to their clients. By doing so, the client recognises that the broker can help them with all sorts of financial requirements and not just their home loan, ensuring they keep coming back for the long term. M I www.mortgageintroducer.com

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CONVEYANCING

The time to deliver Mark Snape chief executive officer, Broker Conveyancing

he old adage about ‘lies, damn lies and statistics’ was brought home to me recently when reviewing some data around the number of property sales in England and Wales that fall through. Quick Move Now, a company that buys property, collated this data, and for the first quarter of 2021 the stats read that “fewer than one in three (32%)” of sales fell through. This use of the word ‘fewer’ immediately raised my ire, as if the fact that pretty much one in three transactions falling through is anything to be positive about. Three purchase customers come into your office – or in pandemic times, conduct a Zoom call with you – and of those three, one is likely to see their hopes of purchasing their home dashed. That, to me, doesn’t seem like a positive worth highlighting – indeed, it just shows that there are a number of fundamental issues that need addressing quickly. However, if you consider 2020 as a whole, Quick Move Now’s 2021 Q1 data is apparently better than what customers were dealing with last year. Then, the fall-through rate was deemed to be 43%, and it won’t take a genius to work out that this is close to one in every two purchase transactions falling through. Perhaps it’s small mercies that we’re not seeing that figure go up, rather than down. And yet, in a misreading of the room which you would only think possible if you were the owner of a top six English football club, there seems little to shout about when one in three customers are likely to be losing money because they’re unable to complete the purchase they set out on. Why are sales failing? It’s a combination of reasons, but mostly it’s www.mortgageintroducer.com

down to people changing their minds as they work through the transaction, and given the way that our system works, it’s also likely to be due to information coming to light which doesn’t meet with the original expectations of those involved. Other reasons include an inability to secure a mortgage, unsuccessfully trying to renegotiate a lower price, or gazumping – which we’re led to believe has also increased as the supply of properties falls and, as a result, higher offers come in at later dates. What must consumers themselves think about such a process? Where property information, which can fundamentally change their views on a home, only appears weeks or months down the line? Where there is no certainty that their accepted offer won’t be usurped by a higher one? Where a seemingly committed party can change their mind on a whim or drop of a hat, leaving them having to start over again? The fact that there is so little certainty within the housebuying

“Thousands upon thousands of transactions complete successfully every month, but what could we achieve with a system which has certainty built in?” process until the point of exchange or completion makes an already stressful situation even more so for all involved. This is especially true when you have a large chain of transactions all reliant on each other, and in which one break in the chain can bring everyone else down with it. You might have done everything within your power to successfully transact, but it counts for nought if other parties decide that this purchase, which they were so sure about just weeks ago, is now not for them. It’s no wonder, given this situation,

There is little certainty in the housebuying process

that there is a growing focus on getting our system fit for purpose, let alone working super-efficiently. I’m completely aware that thousands upon thousands of transactions complete successfully every month, but what could we achieve with a system which has certainty built in? Where the provision of upfront information means no nasty surprises down the line, where there is a commitment from all those involved to complete, and where everyone has their ducks in a row at the start, rather than attempting to get them in order over the course of months and months. This would allow us to start from a much firmer foundation, and would help all stakeholders achieve their aims within a much shorter timescale. It cannot be a source of pride for our sector that it takes four to six months to complete a purchase, especially when we should all be acutely aware that a quicker process provides us with the ability to work with more clients and to earn more income. One in three customers going away disappointed from their potential purchase is not a badge of honour – even if it is better than last year. That level of aborted transactions has to change – we have the means to do it and there is no better time than the present to deliver. M I MAY 2021 MORTGAGE INTRODUCER

THE OUTLAW

THE MONTH THAT WAS

THE

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

THE THE

AND THE

eez…what a month. With protests, invasions, celebrity court appearances, a royal funeral and cronyism and complacency everywhere, there’s so much to cover. We’ll start with some good news. You’ve probably got this drift already, but let’s be really precise about this: household gross savings last year were a staggering £238bn, a jump of nearly £139bn – or to put it another way, a whopping 7% of GDP. Now, not all of this will shortly be splurged by neither us contented Brexiteers at Butlins, Pontins or Centre Parks, nor by the still re-moaning London elite as they have to go glamping for the first time in the New Forest – it’s just so very un-continental! Not a skinny mochaccino in sight, poor things... But if just a quarter of this sum is expended this year, then it will boost consumer spending by 2.8% and GDP by 1.6%. These figures are important, because we are now at the point in the cycle where the risk and pricing mandarins at our mortgage lenders are trying to gauge

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Dickinson: Did a stretch Photo: Cubankite / Shutterstock.com

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when the next sh*t sandwich will be served. When will this amazing bull run abate? It’s almost been too good, hasn’t it? Stamp duty concessions, movers chasing acreage and lebensraum, and a generous furlough package still supporting the job market. But that’s also a venn diagram that makes economists nervous. I was lucky enough to share five hours with two mainstream lenders last week. Apart from learning that their golf handicaps are now fresh outta Guadalajara and Caracas, they were at pains to point out that all this cash sitting on their balance sheet is only encouraging them to lend more, and both were optimistic about the prospects for 2022 and the post-furlough world. There we have it. All roads now lead to Rishi’s furlough cessation and its aftermath. Talking of roads, good luck to any readers trying to navigate the streets around our footie grounds right now, where the donkeyjacketed Gary Neville has become a tiresome bore with his caviar-socialist rantings. He doesn’t speak for all of us and he needs to be told that, as well as being reminded that he and his beloved Surreychester United colleagues once ditched the FA Cup to appear in a vainglorious mini-tournament in Brazil! Remember that tosh? Notwithstanding, the long-overdue supporters’ revolt we’ve seen this past three weeks has provoked a mixture of joy and relief. It’s ironic, really. The premature ejaculation that was the Big Six’s ESL plans has now let the fan-genie well and truly out of the bottle, and it won’t be going back any time soon. It had the smell of the recent anti-Wall Street traders’ rebellion, didn’t it?

Butlins: All those savings need to be spent somewhere Photo: Peter Titmuss / Shutterstock.com

A welcome to hotel Strangeways for Giggs? Photo: Ryan Jenkinson / Shutterstock.com

That actual insurrection died soon enough, as ‘big money’ rarely loses. But that won’t be repeated here, and it’s a fantastic two finger salute to the gluttonous and vulgar despots running not only the English clubs, but those ignorant buffoons at Madrid, Barca and Juventus. In a compelling parallel to the Brexit wrestle, these Euro-bullies took a bloody good beating, and without any of the violence that saw some of Furloughpool Fuutball Club’s consistently misbehaving fans bottling the Madrid players’ coach two weeks earlier – and on the eve of the tragic Hillsborough anniversary no less. Classy as ever. Back to our world, and on to the subject of some totally unsurprising – and profitable – announcements from LBG, Santander, and HSBC. It’s amazing, isn’t it, that whenever a lender makes ‘provisions and write-downs’ in the case of a sh*t-show market, much of this gets almost immediately written back in the following year, with all targets consequently smashed and executive bonuses restored? Nobody ever seems to call them to account for this, so whilst I am no fan of the noise around the likes of digi-warriors such as Monzo or Starling, the behaviour of our top banks really is a parallel to that of UEFA’s football elite. It’s all far too cosy and unchallenged. → MORTGAGE INTRODUCER

THE OUTLAW

THE MONTH THAT WAS

FCA: Cosy and unchallenged

Which is also an appropriate way of categorising the Financial Conduct Authority (FCA) right now, both reputationally and in terms of its fitness for purpose. It’s had a truly rudderless and lazy COVID-19 period. I can write with authority on this, as several – respected and tolerant! – industry figureheads have informed me about anecdotal experiences that the FCA’s Working From Home Policy has been producing entirely sub-optimal outcomes. Primary amongst these is the regulator’s sloth in confirming appointed represtentative (AR) appointments, many taking an inexplicable six months to validate. So, you can imagine the industry-wide incredulity last month, when the FCA outlined a new charging structure. Clearly £700m a year in fees already just isn’t enough, all whilst a recent 494-page independent review by Dame Elizabeth Gloucester listed a “litany of failings.” To close, and in a nod to the recent Oscars, it’s time for some of our own sectoral nominations for the remainder of 2021. Three lenders to watch closely in H2. The first is Tandem Bank – Louisa Sedgwick should bring a renewed vigour to an emergent outfit, which already includes the talented Karol Walton.

MORTGAGE INTRODUCER MAY 2021

Big Six’s ESL: Premature ejaculation

Secondly, Foundation is also a very progressive niche lender right now, with some sparkling rates for what are occasionally less than vanilla cases. And thirdly, OneSavings Bank’s (OSB) welcome announcement last week on its topslicing policy really caught the eye. The OSB leadership team is arguably the most skilled and distinguished in its sector, and some of the garbage that was recently reported amid an understandable year-on-year reduction in its numbers doubtless made good fish and chip paper. That same fish and chip paper might also have included the forecasts from all those Brexit experts who foretold a trading armageddon once we were out. What actually did happen once the French stopped stymying our cross-channel trucks...? You guessed it, folks, February saw a sparkling uptake in exports on the previous month, and it was not the cataclysmic collapse from 12 months earlier that the bedwetting remoaners had foretold. Next month we will discover whether Ryan Giggs’ alleged misdeeds might see him moving from Hotel Football in Manchester’s swanky city centre to the Queen’s less salubrious hotel down the road, known formerly, of course, as Strangeways. If Giggsy’s place in the Premier League hall of fame is now looking unlikely, then at least he might make it into the porridge club at Manchester nick, which includes such distinguished former residents such as Harold Shipman, David Dickinson – yes...Mr Permatan served three years there! – and of course Ronnie Barker’s fabled creation, Norman Stanley Fletcher. Footballers, eh...seemingly never sated. I’ll be seeing you. M I Photo: Kai L Connell / Shutterstock.com

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INTERVIEW

TMG MORTGAGE CLUB

Join our club… T

he Money Group (TMG) launched its mortgage club in April, as part of the group’s continued expansion. The newly minted TMG Mortgage Club soft-launched, with an additional two launch phases planned for later in the year. TMG Club is led by managing director Paul Lewis, who joined the firm from Mansfield Building Society, where he was head of intermediary sales. In his time at the Mansfield, Lewis instigated the ‘Power Of 8’ initiative, which helped raise awareness of some of the niche lending opportunities that smaller building societies and specialist lenders can offer. Having first being launched with the lofty ambition of “knocking down the walls between broker and lender,” we caught up with Lewis to find out how he plans to shape the club. Why make the move from a lender to a mortgage club? While I thoroughly enjoyed my time at Mansfield Building Society, I really wanted my next to move to be one that enabled me to be a part of building something special. After hearing the vision of not only the club, but more importantly the overall brand and direction, it was something I wanted to be part of, I learnt an awful lot in my time at Mansfield, and felt that the timing and fit for myself and TMG was perfect.

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What are TMG Mortgage Club’s plans for 2021? The main focus for myself will be the club itself, and building a club that provides an even playing field for all lenders on the panel, all of whom will have direct access to our brokers. Having brought together the ‘Power of 8’ in 2019, I realised there was a far more collaborative approach that could be adopted, one where lenders can work together for the greater good of not only the broker, but more importantly the consumer, getting them the correct advice and products. The wider group is expecting to double its broker headcount over the next 12 months, whilst also starting to making inroads on plans for our own internal conveyancing arm, alongside our own funding line, which we intend to launch in 2022. What is the major difference between TMG Club and other clubs? We have invested heavily in a system called ‘Place my Case’. This will be an online portal for our members to place problematic cases. All of our lending partners are encouraged to communicate with the broker directly, as this will remove the barriers that currently exist. The age old saying we sometimes don’t know what we don’t know springs to mind. We truly want those niche lenders to be rewarded for the fine work done www.mortgageintroducer.com

INTERVIEW

TMG MORTGAGE CLUB

Mortgage Introducer speaks with Paul Lewis, managing director of the newly launched TMG Mortgage Club, about his plans for 2021

when designing dynamic lending solutions. This will mean brokers will have access to 35-plus lenders. This is a first for the industry and has being developed on the back of feedback from brokers and lenders alike. We very much class what we are developing as #yourclub, by which we mean this is all about our lender and broker partners. We will be removing barriers to enable both sides to work closer together in harmony. When does TMG Club officially launch? The first stage of the launch was completed on 21 April. We intentionally started out with a soft launch with a select number of lenders, because we are very conscious of the risk of over-promising and under-delivering. We already have agreed a stage two launch to add new lenders on, and we will announce more information in due course. Watch this space. What does the event programme look like for TMG? We have our first event planned in for 30 June. This is billed as ‘An evening with TMG’, and comes after our annual general meeting, providing our panel members with the opportunity to meet our brand directors and the TMG senior management team. We aim to organise our first full day event in Autumn and will follow up with an awards evening towards the end of 2021. All of this, of course, will be dependent on government advice and is subject to change. M I www.mortgageintroducer.com

Paul Lewis

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DIVERSITY AND INCLUSION

RHETORIC OR REALITY? At Mortgage Introducer’s recent round-table, chair Clare Jupp, people development director at Brightstar, led a timely discussion around diversity in the mortgage industry and how to create meaningful change

ccording to September 2020 statistics from the UK government, in every socioeconomic and age demographic, the percentage of white British households that owned their own home was higher than the percentage of homeowners among households of all other ethnicities combined. Meanwhile, factors such as the gender pay gap are contributing to a gender mortgage gap, with a report compiled by the Women’s Budget Group in 2019 finding that when buying a home, women need more than 12 times their annual salaries, compared to men’s eight. There are many elements that play into creating disparities such as these among mortgage industry consumers, but the first place to start is addressing internal issues within the market. So, how can the UK mortgage industry make an effective commitment to diversity and inclusion?

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Chaired by Clare Jupp, people development director at Brightstar, Mortgage Introducer asked representatives from Air Group, Belmont Green, the Association of Mortgage Intermediaries (AMI), the Mortgage Advice Bureau (MAB), VIBE Finance, Wilton Property Finance, CETA Insurance, Together, Movin Legal and Coreco for their views on the issue. PEOPLE AND PERFORMANCE In 2019, analysis from McKinsey & Company found that those businesses in the top quartile for gender diversity on executive teams were 25% more likely to have above average profitability than those in the fourth quartile. This trend is growing, up from 15% in 2014. The difference between business performance among the top and bottom quartiles goes up to 36% when looking at ethnic diversity. www.mortgageintroducer.com

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DIVERSITY AND INCLUSION Sundeep Patel, director of sales at Together, says: “All the research shows that firms that have a more diverse and inclusive management structure, as well as a workforce, do perform better. “The culture tends to be better, and customers relate when they can see that in a business.” Emma Hall, business development manager at Movin Legal, reports being referred, due to her gender, as not being “important to the future of [a] business,” highlighting that the attitudes among senior staff can cause the disenfranchisement, and ultimate loss, of female talent, not to mention that of people with other protected characteristics. However, she points out that progress has been made in this industry to change with the times, certainly when it comes to gender equality. Hall says: “Back in 2004, there were definitely a lot more barriers than we have now, and over recent years Women in Finance has helped massively in breaking down a lot of those barriers.” Andrew Montlake, managing director at Coreco, adds that inclusion, welcoming everyone and giving them equal chances of success, has numerous implications. He says: “It’s not just legally important, or morally important, there’s a damn good business case for it, because diversity of thought within a company will take you to the next level.” TOP TO BOTTOM Many businesses focus on recruitment in order to boost the diversity among their ranks. Key tips suggested by the panel include insisting on diverse candidate lists from recruiters, and removing names from CVs to weed out unconscious bias. Rachel Geddes, managing director at Mortgage Advice Bureau, City of London, notes that some selection criteria can also be problematic. For example, minor mistakes on a CV might be due to dyslexia. Businesses should therefore take the time to reconsider what skills are actualy integral; for a role in which written skills are either not deal-breaker, or where assistance can be made available, it is not worth losing a strong candidate due to knee-jerk reactions to a CV. Geddes adds that busineses should clearly signify from the recruitment stage that there is a culture of openness and acceptance when it comes to cognitive

“All the research shows that firms that have a more diverse and inclusive management structure, as well as a workforce, do perform better” SUNDEEP PATEL

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“You hae to show that people at the top are serious about diversity, exude that passion for it, because if you don’t it just becomes another tick-box” ANDREW MONTLAKE

diversity. While not all candidates will feel comfortable disclosing, making it clear that they will not be penalised is the first step to broadening the talent pool. Jupp notes that, in starting the process of weeding out bias against one group, the way is often paved to a more general approach to diversity. “Looking at women as an underrepresented group for us has made us reflect on how well – or not so well in some areas – we are doing with other protected characteristics,” she explains. “Many of the practices and changes, such as the way we’ve changed our approach to job advertisements, have in fact improved other aspects of diversity in the business.” Jennie Walton, chief culture officer at Belmont Green, agrees that recruitment is a good place to begin. She says: “It’s where it all starts from – having the richness of candidates at the entry points, and then thinking about whether the pipeline is wide enough.” However, she goes on to add that this pipeline is often a falling off point: “Most organisations have a greater richness of diversity in those entry-level roles and as you become more senior that reduces. “What we need to understand as employers and as an industry is what are the barriers that inhibit progression. There’s so many contributing factors, and it’s about taking the time to understand them.” For Patel, boosting diversity at recruitment can only go so far; there also has to be a top-down approach before these practices can become embedded. He says: “Start at the boardroom. Diversity and inclusion is a buzzword at the moment, but while the employment pool is more diverse, when you look at board-level it’s pretty much stuck.” He points to the recent appointment of Nikhil Rathi as CEO of the Financial Conduct Authority (FCA) as a good example of progress, as Rathi plans to not only focus on diversity within the regulator itself, but also across the market. He reportedly aims to bring in a style mirroring the Nasdaq in the US, which requires firms to have two directors from underrepresented backgrounds, which Patel believes will “implement change at board level which will then cascade down.” However, Kim McGinley, director at VIBE Finance, notes that this means changing minds around boardlevel recruitment. → MAY 2021 MORTGAGE INTRODUCER

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DIVERSITY AND INCLUSION “The old school way of doing things is to look for people with board-level experience, when really it should be about transferrable skills,” she says. “It’s a change in thinking that not many will actually be brave enough to do in their recruitment process. “There’s so much public discussion, it’s easy for all of us to assume there’s increased awareness being translated into action, but it’s not actually happening.” McGinley adds that there are other factors at play in terms of the pipeline to higher roles, such as people not putting themselves forward. This might be to do with a lack of confidence and support, restrictive or exclusive wording in job listings, or the vicious cycle that candidates are less likely to be able to picture themselves in a senior position if they lack role models who share their own characteristics. This is where mentoring and sponsorship come into play. The first is the practice of providing junior staff members with a senior individual to advise and coach them. Sponsorship, in contrast, is a more active approach, giving senior leaders the responsibility to involve a diverse range of staff at higher levels, suggesting them for consideration and making sure they are part of important conversations that would otherwise take place behind closed doors. All of these elements, whether changing recruitment practices, opening up the talent pipeline, or providing board-level mentoring and representation, need one foundation: genuine leadership endorsement. Montlake says: “You have to show that the people at the top are serious about it, exude that passion for it, because if you don’t it just becomes another tick-box. “You have to really want to make that change. Then you have to get everyone’s buy-in, so it becomes their passion as well.” COMMUNICATE AND COMMIT The next step is openly committing to clear goals and values, and communicating what that means for the business. McGinley says: “These conversations happen behind closed doors at board-level and with HR, but is there an affirmation and confirmation to the business as a whole that this is what we’re doing, to hold ourselves accountable? It’s a responsibility thing.” Montlake outlines that Coreco codified its own commitments to “be unique, different and diverse,” and added accountability through methods such as providing a copy of these values to new starters, and integrating them into the bonus scheme. He explains: “It’s about repeating it all the time, and making sure it underpins every process.” Public commitments and charters, such as Women in Finance and Race at Work, can also help, both in terms of understanding what equality and inclusion means in reality, and structuring and broadcasting a codified approach.

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Jupp explains: “You set yourselves targets and you are required to report on those and be measured against them, which makes you reflect. The minute you start making changes, you immediately start to see progress.” Mobeen Akram, national new homes account director at MAB, says: “How many companies have a diversity and inclusion policy? And if they do, do staff actually know what the policy is, to make sure they implement it in practice? “It’s not just about having a policy and talking about it, but actually checking and balancing it.” This communication goes both ways, Akram adds: “As human beings, we have a lack of understanding of other people’s cultures, religions, or whatever it may be, which can sometimes be a barrier.” By widely discussing and committing to strategies around diversity and inclusion, a business makes a clear statement which – if done well – shows it wants staff to feel they can be themselves in the workplace. This can then lay the foundations for open and honest communications, helping staff feel more included, and a business to build a broader and more accurate understanding of its employees and their

“How many companies have a diversity and inclusion policy? If they do, do staff actually know what the policy is, to make sure they implement it in practice?” MOBEEN AKRAM

needs. In turn, greater cultural understanding can help weed out and undo unconscious biases. Jupp agrees that businesses should make space for discussion with their employees. She says: “The obvious place to start is to talk to people. What would be good for you? What things should we be doing? We shouldn’t be embarrassed to have those conversations.” Akram agrees: “We should not be afraid of offending, or embarrassed about being open with each other. “It’s different if someone says something deliberately offensive, but we should be open and talk frankly, or change won’t happen.” Some businesses create these conversations by establishing a neutral, even anonymous, space for discussion, for example on an employee hub or following specific diversity and inclusion events. These spaces need to be carefully monitored, but when implemented thoughtfully can allow for people to educate themselves, each other, and the business. Fran Green, national sales manager at Air Group, says: “There is that taboo and that fear that if you www.mortgageintroducer.com

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DIVERSITY AND INCLUSION ask the wrong question in the wrong way, you could offend somebody. “That’s where it would be great to have more conversations where people are open in a two-way direction, a truly sharing experience, so we can all learn.” FEARING FAILURE For many businesses, making a public commitment to improving representation brings with it the risk of broadcasting when these targets or values are not met. Early mistakes can also have a dangerous stalling effect on an entire movement, Sinclair explains: “I can remember having discussions way back in the ‘80s about gender equality, and when we started to push women into more senior positions in order to give them exposure and opportunity. “We got that wrong, because we didn’t give them all the tools and we didn’t protect them. We wanted to judge them by the standards of people who had years more experience. That meant they failed, and that set the cause back a long time.” Decades later, the picture has improved, but not by enough, he adds: “We have pushed so hard on gender for so long and just about got to 50-50 in jobs, but the pay gap is still atrocious. “Until we set targets and embed this in firms all the way through, nothing will change. We need to set achievable targets over timeframes that people can adhere to and deliver against, and then not let them off the hook when they fail.” While this idea of being held to account might seem daunting, Sinclair adds that failures should be an opportunity to educate and push for progress, rather than attribute blame. Public accountability simply ensures that stumbling does not halt progress. Indeed, Jupp reinforces that charters such as Women in Finance are focused on celebrating positive progress: “For some there’s the worry about bad press if you don’t meet your targets, but it’s not so much about meeting them as the progress towards them. Anything you’re doing is better.” Sinclair adds: “If you fail to meet a target, let’s have a good honest conversation about why, and get there as soon as possible.” Failure can also be an opportunity for deepening two-way communication, by asking employees or

“Diversity is the mix, and inclusion is getting the mix to work together. The strength that you get from that is exponential” KEVIN PATERSON

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“As a business owner, you want everybody in your business to perform as well as possible, giving them the tools to do so. One of those tools is the ability to have a voice” RACHEL GEDDES other businesses what could have been done better. To ensure continued accountability and transparency, businesses should endeavour to share the results of these conversations. That way, negative practices that have gone unnoticed can be highlighted and removed. Sinclair explains: “[In one example], verbal critical reasoning tests they were using were biased against people from ethnic minorities. “This was at a business with all the best ideas about how to be different, but which was using things that allowed the status quo to remain. All these years we’ve been walking around thinking we’re doing the right things, but not doing enough. “We have to actually take a fundamental shift of people’s views around what is right and what is fair.” FROM DIVERSITY TO INCLUSION Kevin Paterson, director of sales and marketing at CETA Insurance, argues that you cannot attain the status of being a good company to work for unless employee engagement is a focus. Inclusion – beyond diversity alone – is key to this. “Diversity is the mix, and inclusion is getting the mix to work together,” Paterson says. “The strength that you get from that is exponential in terms of productivity, buzz and feeling within the organisation.” In a diverse group, every individual brings different strengths to the table. While diversity policies can often slip into being a box-ticking exercise, focusing on numbers, making the bridge to true inclusion means creating and culture in which people feel welcome, seen and able to work to their best abilities, with the end result benefitting the business, as well as employees. One of the ways in which diversity approaches can fail is if, once recruited, individuals are not catered for and helped to thrive. Montlake says: “We’re about to do a piece of work at AMI around diversity and inclusion, to really understand where we are now, and to help provide tools to make sure we can actually create difference in the future. One of the key things we started on was, is it diversity or inclusivity, and what is the difference? “Inclusivity to me is everyone and everything, not just black, white, male, female. It’s showing that we can offer people from all walks of life the chance to succeed.” → MAY 2021 MORTGAGE INTRODUCER

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“There’s so much public discussion, it’s easy for all of us to assume that there’s increased awareness translating into action, but it’s not actually happening” KIM MCGINLEY A DIFFERENT FUTURE While the events of 2020 and the COVID-19 pandemic have caused untold difficulty and harm, often more heavily weighing on some of the groups being discussed here, one positive is that it has started to change many traditional attitudes to work. Walton says: “What [COVID-19] has started to do is actually unlock some of those conversations about areas where we’ve been quite traditional and staid in our ways of working. “Expanding out to be more agile and hybrid will in turn widen out the candidate pools. We’ve already started to see that with our own hiring over the last year.” This might be as simple as opening up to less London or city-centric talent pools, but also has knock-on effects when it comes to disability and accessibility, helping businesses realise that an employee does not necessarily have to commute into an office every day to be effective and valuable. Geddes says: “Even physical disabilities might not be visible to the eye. By giving colleagues the ability to be flexible in how they work, they can be more productive. This ability to be flexible might centre around the physical workspace and accessibility, or it might feed into a team approach which considers how workloads can be shifted across those who are best suited to them. Embeddig this flexibility as part of a company approach means not only enabling those who need to adapt their working environment feel comfortable doing so, it can create the opportunity for all employees to work to their strengths. Going back to the recruitment stage, Geddes notes that informing every prospective employee about the business’ culture and commitments to inclusion, even insofar as adding it to information packs alongside details about admin and benefits, will not only create accountability, but take the onus off an employee to take the first step in disclosing additional needs. She says: “As a business owner, you want everybody in your business to perform as well as possible, giving them the tools to do so. “One of those tools is the ability to have a voice, and sometimes to say I need help.” Patel notes that this agility and flexibility might come easier to smaller businesses, while larger corporates will

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have to do more work to break longstanding structures. The work is worth doing, though, as it has the potential for a positive impact on all employees, regardless of protected characteristics. Other recent shifts have been less tangible. For example, Hall believes that the pandemic has helped people to relate to one another better, despite what differences they might have on paper: “If we want to take one positive out of COVID-19, it’s been the ability to look at our businesses as more of a whole. “It also gave us a chance to get to know people – we’re very quick to judge someone straight away, rather than look at them as a blank piece of paper. But during COVID-19 we actually got to showcase ourselves as people. That’s a massive start.” The pandemic has hopefully opened up many people’s empathy and understanding around the challenges being faced by others, whether colleagues or clients. This shared understanding is another element that having a diverse workforce can reinforce, particularly when dealing with a varied client base. Zara Yeganeh, mortgage and protection adviser at MAB, says: “We are very lucky in London to be in a very multinational city. “I use my Iranian culture to deal with different clients in the very culturally blended area in which I work. I am able to make a connection with many of them, and it has worked for me really well. I am using this diversity to create inclusion.” Yeganeh adds that working within a culturally diverse team has also fostered a strong sense of creativity, as well as the ability to relate to a multitude of clients. She says: “When many of your customers come from different nationalities, it’s very important for employers to bring different cultures in, there can be lots of benefits.”

“Ticking the quota box is a vow to fulfil your ethnic, religious or gender diversity, but what we tell ourselves outwardly and how we behave internally can be different” FAHIM ANTONIADES However, Fahim Antoniades, founder of Wilton Property Finance, argues that businesses should not focus so much on reflecting the make-up of society in the ethnic diversity of their employees. For one thing, the statistics behind this are somewhat unclear. Instead, he explains, businesses should be focusing on the bigger picture: “The bigger question is, what kind of jobs do [people from ethnic minorities] do www.mortgageintroducer.com

PANEL

DIVERSITY AND INCLUSION once they’re in those occupations, and what career opportunities are open to them? “From a personal observation, unfortunately the highest paid jobs are often inaccessible. That’s what business needs to tackle. “Rather than focusing on – and taking pride in – ticking the quota box, go for the bigger prize, providing real and equal opportunities.” The focus on providing a box-ticking reflection of society in the cultural, gender or ethnic mix of advisers available to consumers, for example, arguably allows organisations to simply celebrate having met a quota, and detracts from the more important goal of thought diversity as a vein running through a business. This is where Antoniades draws the line between conscious ‘wokeness’ versus subconscious bias – people who are performatively inclusive can still have underlying preconceptions, whereas having true diversity of thought can be the difference between uprooting unconscious biases and leaving them to fester and negatively inform processes and client interactions. He adds: “The biggest hurdle, or danger, that we have is subconscious bias. Ticking the quota box is a vow to fulfil your ethnic, religious or gender diversity, but what we tell ourselves outwardly and how we behave internally can be different. The biggest thing we can do as firms is introduce subconscious bias training.” However, Akram argues that while making this into a numbers game is indeed damaging, it is only in building the diversity of the workforce that true inclusion can follow. Businesses cannot educate themselves meaningfully in a vaccuum, and unconscious bias will only truly be dealt with by experiencing a melting pot in the workplace and normalising diversity at all levels. “Inclusion is different for each firm,” Akram explains. “We have a barrier because we don’t know enough about each other. The first step is to have people with diverse backgrounds, and inclusion will come with it because we will learn from each other. “Right now, more needs to be done across the board to improve this.” MAKE IT REAL There is a clear when the performative side of diversity lacks the commitment to embrace the values behind it. Paterson says: “[Some businesses] are just paying lip service rather than actually doing anything fundamentally different, because if they did they would address it internally first.” He adds: “The first thing to understand is that it’s not a quick fix. There’s not something you can put in today and solve the issue, it’s a cultural shift within the business. Once that momentum starts from the top it has to be bottom up and middle out, until it becomes a systemic part of your DNA. “You’ve got the organisations that really want to embrace it, you’ve got the super ‘woke’ end as well, www.mortgageintroducer.com

which takes it to the extreme, but then you’ve got the others that just pay lip service, and that’s the challenge, because there isn’t any real understanding.” Green adds: “From a company point of view, you need to look internally in the first instance and be really critical of yourself, celebrate where you have diversity and identify where you haven’t, and come together to create a strategy.” “It’s about walking the walk – the rhetoric has to be the same as the reality,” agrees Jupp. This comes back to elements such as accountability and communication, and considering what diversity and inclusion really mean for each individual business. Having a clear sense of the end goal, and what inclusion would look like in an ideal reality – rather than as a vague abstract – lays the foundations for making real, long-lasting change. If this kind of communication is not already a part of the culture, a place to start might be as simple as surveying staff about their experiences, which Walton explains has been key at Belmont Green while developing a diversity and inclusion policy.

“We’re very quick to judge someone straight away, rather than look at them as a blank piece of paper. But during COVID-19, we actually got to showcase ourselves as people” EMMA HALL She says: “The starting point is opening up conversations, talking to people about whether they believe there are any barriers, and how the organisation might treat behaviours that are negative. “As an employer, we’ve got massive responsibilities to create an environment where people feel welcome, have a voice, and feel encouraged to talk and come to work as themselves.” Ultimately, addressing diversity and inclusion needs a varied and intelligent approach, that takes into account both the short and long-term. Some of the measures suggested by the panel can be implemented immediately, while others are slow burning; it is important to measure, communicate and adapt. Underpinning everything, though, is the fact that businesses must wholly commit, rather than seeing this as a box to be ticked. Antoniades concludes: “For things to be longlasting, we’re talking about intergenerational change. The old philosophies and ideals have to fade and new generations have to break out of the mould set by the previous ones.” M I MAY 2021 MORTGAGE INTRODUCER

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FEES

Transparency and fairness in fees Barney Drake CEO, Specialist Mortgage Group

hen the regulator issues a ‘Dear CEO…’ letter, the sector should undoubtedly sit up and take notice. When that letter specifically mentions your sector as a ‘focus for supervision work’, then that should doubly be the case. At the end of October last year, the Financial Conduct Authority (FCA) did just that, and it was clear that the second charge mortgage market – and specifically advisory firms – would be under review. The FCA was considering three main areas: advice suitability, whether customers were getting products that meet their needs, and whether customers understood the process and had been treated fairly throughout. I suspect most advisers active in this area will be confident about the above. The sector has been pretty vocal about these specific areas, and how it perceives itself to be meeting them, but there was another key part of that letter which focused on fees and charges. The industry seems to be less bullish about talking about these areas, particularly when the regulator has said it will be considering whether they are in any way ‘excessive’. You might already draw your own conclusions about the reticence in some areas to review fees and charges in light of this. My interpretation – and it is only my interpretation – is that we firstly need to understand what is meant by the term ‘excessive’ when used in a regulatory sense. In my view, you have to refer to Mortgage Conduct of Business (MCOB) 12.5 to get under the bonnet.

MORTGAGE INTRODUCER MAY 2021

It says you need to consider the following three points: 1. The amount compared to similar products or services on the market. 2. Whether fees are an abuse of the trust a customer has placed in the firm. 3. The nature and extent of the disclosure of charges to the customer. CLEARLY UNDERSTOOD

Fees need to be comparable with the market, must not take advantage of people’s trust, and must be clearly understood by the customer. The customer is then able to make an informed choice around whether to proceed or not. If you agree with that, then you probably get to a position where the old days of being able to charge a flat fee of X% of the loan amount, capping it at £X amount for a second charge mortgage, are over. It’s this widely adopted approach that has given an understandable perception that second charges are too expensive an option for advisers to recommend to customers. Furthermore, the regulator believes that around 27 million adults in the UK are vulnerable at the moment, and I would imagine they are keeping a very close eye on firms small and large to put in place a layer of protection for these, and indeed all consumers, against paying excessive fees at a time when so many have financial concerns. That being the case, now more than ever is the second charge advising community’s time to ensure fair and reasonable fees are charged without compromising service standards. In our 20th year of business, Specialist Mortgage Group, like many, has taken significant pride in providing exemplary service – quick and reliable decision-making, speedy delivery of all documentation via our in-house couriers to and from the customer, a thorough analysis of the costs and savings for every line of credit

needing to be consolidated, while constantly keeping the customer and the introducing broker up-to-date with all developments. The support team working behind the scenes ensures smooth delivery, mitigates against mistakes, and validates suitable advice via call monitoring for each and every application, while senior management keep a constant eye on ensuring the firm’s systems, procedures and oversight are tight enough to identify issues, apply resolutions and pave the way for ongoing enhancements. Some standards we provide are unique, some aren’t. My point is that each and every firm has its nuances, and these cost a not insignificant amount which needs to be financed from the procuration and broker fee. An insufficient supply of such income therefore compromises the quality of service provision. There are some who are expecting the regulator to cap fees, and others who don’t believe this will happen. Although this method addresses any immediate concern of excessive fees, I believe this approach has the potential to stifle growth and service standards. However, if the full extent of charges can be presented so that customers can pick and choose which elements of the costs are either paid upfront or added to the loan, then customers can clearly see the components, instead of one unexplained figure. It is only at this point that they can then make an informed decision. My worry is that if a cap is placed that is drastically lower than the current average – my guess would be around 5% of a £50,000 net loan – then this will have a significant knock-on effect in the form of compromised service standards, and potentially an industry which is unable to operate, which will then only adversely affect the many customers for whom a second charge mortgage is the most suitable product. Getting the balance right here is vitally important. Of course, excessive fees need to be abolished, but fees for the work involved, which are ultimately responsible for the service being delivered, have to be charged, and charged transparently. M I www.mortgageintroducer.com

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SECOND CHARGE

Second charge key for going green Steve Brilus chief executive officer, Evolution Money

he last few years have seen much tougher rules in place for landlords when it comes to the energy efficiency of their properties. Back in 2018, regulations were introduced which required rental properties to have a minimum energy efficiency rating of E on their Energy Performance Certificates (EPCs) for all new tenancies. A year ago this was extended to all existing lets, not just new tenancies. These new rules are undoubtedly worthwhile. As an industry, we want to see the highest standards of properties available to tenants, and that has to cover the energy efficiency of a property, as much as it does the decor and furnishings. Of course, this is not just an issue for the private rental sector; all owner-occupiers, and those who own properties but might not live in them, are having to review the energy efficiency of their property, and consider what improvements they could make to make them more energy efficient. On top of that, they’ve also had to consider how to pay for those improvements. Boasting a more environmentally friendly property isn’t just a good idea from a legal perspective – it makes sense as a business decision too. As a nation, we are becoming far more conscious of environmental issues, particularly since the pandemic. By being able to promote the energy efficiency of a property, and by trumpeting its green credentials, investors can appeal to a far broader group of potential tenants. There’s a financial case to make, too. Mortgage lenders are increasingly going green, launching mortgage deals that deliver a lower interest rate if you meet a certain energy rating threshold.

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These are only likely to become more common in the years ahead, so improving the efficiency of a property portfolio, or an additional property, can mean added financial savings, beyond simply a smaller gas and electricity bill. Given the clear incentive, therefore, to make those greener improvements within properties, the big question still remains, how do you pay for that work? Advisers know only too well that many owners won’t have the funds sat in a savings account ready to go, so instead may look to raise the money against the property or properties. Remortgaging at a higher loan-tovalue (LTV) is one option of course. But with landlords, for example, increasingly opting for 5-year terms – and likely securing an enviable rate given the current low interest rate environment – they may be locked into that deal for a significant period. The prospect of having to pay an exit fee, and potentially move away from that low interest rate, in order to raise the funds for property improvements is not exactly a thrilling one. There is another option though, in the form of a second charge mortgage. Second charges are increasingly being recognised as a versatile funding option for what we call owner nonoccupiers, such as investors or those that own second or third homes. They allow individuals to tap into the equity in their properties, and use it to raise the funding for those refurbishments.

The owner non-occupier then doesn’t have to touch that first charge loan at all, and instead can enjoy the terrific rate their adviser has found for them for the full length of the term, while the funds from the second charge loan can be turned around swiftly, allowing the owner to potentially get on with the work needed to take their properties up towards higher energy efficiency levels. We are already seeing demand from advisers for second charge loans for precisely this purpose, and we are far from alone. In fact, in the most recent Knowledge Bank tracker – which monitors the most common search terms used by advisers on its criteriabased system – ‘capital raising for home improvements’ turned out to be the fourth most popular term for second charge loans. Advisers are already becoming much clearer on the potential that second charge mortgages can offer their clients when it comes to debt consolidation, or for owner-occupiers looking to carry out home improvements. However, these products can prove just as useful for owner non-occupiers looking to lift the standard of their properties, whether that is with the aim of going greener, or of carrying out some other form of work which will improve the property’s attractiveness to potential tenants and – in the future – buyers alike. M I

Second charge mortgages are increasingly being recognised as a versatile funding option

MAY 2021 MORTGAGE INTRODUCER

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SPOTLIGHT

Humble Briggs Loan Introducer chats to James Briggs, regional account manager at Together, to discuss current events in the second charge market Are you seeing demand for second charges? Second charge loans are an important part of Together’s product set. Since January, we’ve been gradually enhancing our lending proposition, balancing competitive products and resources to make sure our service proposition remains strong. The new products have been welcomed by our specialist distributor partners, and we’ve seen a marked demand for them. Have you completed any interesting cases lately? Yes, one recent case was for two applicants who had bought a new-build property four years ago under the Help to Buy (HTB) scheme, with finance from a high street lender. They wanted to raise capital to convert a garage into a home office and consolidate some credit card accounts. The clients were delighted with the outcome, as it allowed them to settle their Help to Buy loan before the interest payment started, as well as giving them more space for home working in the future, and a fresh start after repaying their credit cards. In another case, a client lived in a coastal holiday resort and owned a barn with some land. They wanted to capitalise on the demand for staycations, so they used a second charge secured against their main home to convert the building into a holiday let. Has the pandemic shaped your product criteria? During the pandemic, we introduced some additional underwriting checks to ensure responsible lending. I believe our current criteria offers a great proposition for borrowers post-COVID, after lockdown restrictions have been fully lifted. For example, we can consider lending to clients who have changed employment in the past 12 months, where a high street lender may not. We can also look at accountants’ forecasts where business is improving for self-employed customers post-lockdown.

James Briggs

MORTGAGE INTRODUCER MAY 2021

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Figures from the Finance & Leasing Association show second charge lending is still down, when will this improve? With what has happened in the past year, it is diﬃcult to predict with any certainty what will happen in the near future. However, the residential property market has remained resilient and, from our point of view, we’ve seen a strong recovery. In the past three or four months, we’ve seen continuous growth in our second charge completions, and I believe this will be mirrored by other second charge lenders, so we should see much improved figures across the industry in 2022 and beyond.

BRIDGING

FINANCE We’re the Experts.

If you could change one thing about the second charge market, what would it be? It would be fantastic to see a better knowledge among customers of second charge products and their benefits. The fact that they don’t have knowledge of these useful products is, I believe, a symptom of the high street lenders not operating in what is still a comparatively small market. Mortgage brokers’ understanding and awareness of the benefits of second charges has undoubtedly increased in the five years since the Mortgage Credit Directive, but it would be good to see more well-known financial commentators talking about these important alternative products to a wider audience of potential borrowers. M I

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1. Ronnie O’Sullivan. What a character, and a snooker genius – the best player of the game ever. 2. Amy Winehouse. She led a fascinating but troubled life and seemed to be a bright, funny and extremely talented person. 3. Alan Turing. One of the best scientific minds of – at least – the past century.

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We’re Expertise You Can Trust.

What music are you listening to at the moment? As someone with strong roots in the North West, I’m a lifelong Oasis fan and always listening to them. What is the best bit of advice you have ever been given? Treat everybody as you would want to be treated.

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SPECIALIST FINANCE INTRODUCER

SPOTLIGHT

Part of the DNA Jessica Bird talks to Jo Breeden and Jason Berry at Crystal Specialist Finance about the importance of wellbeing, why culture is everything, and what the future might hold for the market

ounded as a family run business 40 years ago, specialist distributor Crystal Specialist Finance (CSF) has kept this ethos even during rapid growth. Jo Breeden, managing director of CSF, says: “Even though we’ve grown and our wings are now spread nationally, that family feeling has stayed. You’ve got to enjoy who you’re working with, and culture is everything.” Jason Berry, group sales and marketing director, adds: “That culture is something I observed very early. What I saw was family values and a focus around culture, and being able to see that during a period of crisis took me from being involved as a consultant to actually wanting to be part of the DNA. It goes beyond words to actions and activity.” This focus on wellbeing led CSF to launch a marketwide health and wellbeing campaign in August 2020, in partnership with the charity Mind. Berry explains: “It started with asking, what can we do for our staff? It just seemed logical to extend it into the wider marketplace.” Leadership at CSF has conducted daily check-ins with staff during the pandemic, and endeavoured to keep the business’ culture and values front and centre despite the upheaval of the last year. Breeden says: “You have to look after your staff like they’re your family, and that’s something we’ve done very well at Crystal. Be it a lender, introducer or customer, it’s good to know during these times that you’re not alone.”

MORTGAGE INTRODUCER MAY 2021

Jo Breeden

Jason Berry

CRISIS MANAGEMENT Having taken over the business six months before the financial crisis in 2007, Breeden has considerable experience steering through crisis. “The first thing to do was work out what was going on nationally as an economy,” he explains. “I looked at the drivers in GDP, the trends and what senior economists were saying, applying those numbers to the lending volumes we were doing as a business. “It would be arrogant to think you’ve got the answer, so lean on other people, outside of the industry even, and try and understand the direction of travel and build back from there.” Berry agrees that previous experience has come into play: “As we’ve navigated the last 14 months, we’ve been able to reflect back and use experience [from the last crisis] to make good decisions, collaborate, and not knee-jerk.” Similar to its focus on keeping staff well, CSF based many of its decisions on the need to look after clients during a time of constant change. “We focused on the people,” says Breeden. “When lenders were pausing, we had a duty of care to enhance and increase the level of our communication to clients, let them know what we’re working on and how the market was changing. “Preserving the pipeline was really important as a business, rather than just going into disaster management.” The business has also taken stock of other approaches in the market, both positive and negative. www.mortgageintroducer.com

SPECIALIST FINANCE INTRODUCER

SPOTLIGHT “There were some lenders that stepped up and some pretenders that faded away,” Berry explains. “As the market has recovered, we won’t forget those that stood alongside us and supported us with customer outcomes and the financials we needed to keep operating.” After the initial shock, the situation then became about opportunities. For example, the crisis allowed businesses, CSF included, to step back, take stock, and make well-needed logistical changes, where years of rapid growth might have left little time for more than the necessary operational tweaks. As for the wider market, the flexibility and adaptability of specialist lenders, for example in picking up desktop and automated valuation models (AVMs), has helped the market overcome some of the key hurdles of lockdown. Berry says: “We hope that some of the frameworks that were created out of crisis which helped deliver efficiency are maintained as we emerge into a new world of lending.” Breeden adds: “Once we got our heads around the macro point of view, we started looking at the business, and we realised we can implement change a lot quicker than we had been in previous years.” For CSF, this meant shifting from a perspective of how to make its internal processes more streamlined, to looking outwards at how tech might aid the consumer and broker experience. Berry says: “At the core, we want to make the experience brokers and intermediaries have of engaging with us the easiest and best it can possibly be, minimising the amount brokers need to rekey information. Technology, people and processes have become absolutely core.” The goal is to reach a ‘zero question’ environment, where CSF can receive automated information from intermediaries’ fact-finds, and connect this through to the lenders seamlessly to reach a binding decision. This goal underlines CSF’s approach to reducing the need for rekeying, providing certainty, and giving all parties more space for the complex elements of the job. Breeden points out that this is a trend that has been growing in the market over the last year, and which is going to only become more integral. He adds: “I don’t believe machines will ever replace man in the specialist market because it’s so complex and there are so many variables, but you can use AI to help you with things like speaking to the right person at the right time, and making the customer experience and journey easier.” COMPETITIVE MARKETS In terms of current market trends, CSF is seeing a large proportion of commercial property transactions, and a significant increase in bridging volumes. Meanwhile, the business has seen a dip in commercial owneroccupier business, and in general activity from trading businesses due to lockdown. www.mortgageintroducer.com

Breeden notes that the stamp duty holiday deadline has helped the packager boost its complex buy-to-let (BTL) business, while Berry adds that a key trend at the moment is that of investors diversifying, taking advantage of changes to permitted development (PD). Overall, Berry explains that the specialist finance field is becoming increasingly competitive, which is in turn delivering a benefit to consumers. “[Bridging is] not far away from becoming more mainstream,” he adds. “There’s definitely increased intermediary and introducer awareness. With commercial, the story’s similar – the competitiveness of the pricing is incredible.” Alongside this competitiveness comes an increased focus on good service and the customer journey, which is set to continue. “Just like the specialist market was born out of a strong competitive dynamic in the early 2000s, there’s an opportunity to become more mainstream because of that competitive dynamic,” says Berry. “Not only are we seeing lenders showing an appetite to lend, we’re actually seeing them really keen and interested to see how they can shape and reshape their propositions to make them more compelling, starting with what does the customer experience need to be.” Breeden adds: “I really like the lenders’ attitudes, they’re putting the customer experience at the heart of what they do. The market is doing a pretty good job, especially on the bigger end, to self-regulate, and a lot of the brokers now see it as a viable product in their offering.” THE FUTURE With the stamp duty holiday spurring on demand, the next few weeks are all about strong pipelines, albeit with inevitable stresses around meeting the deadlines. Berry continues: “Beyond that stamp duty deadline, we don’t just think it’ll be PD that creates opportunities in the market. There’s going to be a huge consumer dynamic of opportunity because of the pandemic – the market should be very optimistic.” However, Breeden warns: “We’re not yet out, and it is an ever changing market. It’s about understanding the environment at any given time.” With the end of furlough, as well as the close of various other government schemes, let alone the uncertainty as to how the end of lockdown might affect the pandemic, there are many factors that make the rest of 2021 hard to predict. It is in this environment, however, that the specialist space is able to come into its own. Berry says: “We see the specialist market exploding over the next three to five years. There are consumers who through no fault of their own have been furloughed, their income has been affected, there’ll be blips that force not just self-employed people but a huge consumer market to fall out of the mainstream. The specialist market will grow.” M I MAY 2021 MORTGAGE INTRODUCER

T H U R S D AY 2 4 J U N E 2 0 2 1 | O N L I N E V I S I T W W W. S F I A W A R D S . C O . U K

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MARKET

Why diversity matters Roxana MohammadianMolina chief strategy officer, Blend Network

he commercial benefits of a working culture that is diverse and inclusive are vast, yet the specialist finance sector still lags in terms of diversity and inclusion. The paybacks of diversity and inclusion in the workplace are vast, not only in terms of the bottom line, but also employee satisfaction and attractiveness to potential staff. The financial sector, traditionally known for its lack of diversity, has made considerable advances in recent years towards introducing a more diverse culture. However, the specialist finance and alternative lending sectors are still behind. Why is that? What can we do to improve it? How can we ensure that diversity is here to stay? Typically, the larger, regulated firms have led the charge on diversity in financial services, and have for many years driven an inclusion agenda. As a result, they have made more creative hires and reset their values, and this has had a positive impact on their corporate culture. Consequently, when compared to other industries, larger regulated financial institutions are, in some sense, fairly balanced and display a high level of willingness to embrace diversity. In contrast, the specialist finance and alternative lending sector remains highly fragmented and dominated by a large number of smaller firms, many of which are unregulated and have insufficient diversity. These smaller firms also often lack sufficient access to tools that can enable teams to monitor and improve their representation of disability and ethnicity in their recruitment. Commercially, the key benefit of diversity and inclusion is the creation of innovation and better customer www.mortgageintroducer.com

experiences. If departments take a siloed approach, it can be detrimental to an organisation’s growth, whereas diversity enables a business to change and evolve through difference and collaboration, which many businesses are now realising. Within the specialist finance and alternative lending sector, in particular, implementing diversity and inclusion is essential in helping to address the under-representation of minority groups, and to ensure that a career in the industry is appealing to the next generation of professionals. Diversity of staff also ensures the company can better serve its customer base. Indeed, as a leading specialist lender of property development finance and bridging loans in the UK, we at Blend Network find that having a culturally diverse and gender-balanced workforce allows us to serve our customers best by better understanding their requirements and needs. An inclusive workplace is one where different views, backgrounds, experiences, cultures, and more, are valued and nurtured.

Without diversity and inclusion, firms cannot ensure they have the right mix of people to serve the complex and wide-ranging requirements of their customers. So, what can the specialist finance and alternative lending sector do to improve inclusion? I strongly believe the best way for organisations in this sector to improve diversity and inclusion is to set an agenda and to build an understanding of the business by assessing how diverse and inclusive it already is. It is also important to be able to identify the organisation’s diversity and inclusion issues, get buy-in from the leadership team, establish the firm’s values, and then set diversity and inclusion objectives that are aligned with those values. In summary, as we start to emerge from COVID-19 and into the postpandemic world, now more than ever businesses should champion inclusive growth. Specialist finance and alternative lenders in particular must focus on enhancing their diversity and inclusion footprint. M I

Set diversity and inclusion objectives that are aligned with the organisation’s values

MAY 2021 MORTGAGE INTRODUCER

THE LAST WORD

MORTGAGE BUSINESS EXPO

Events post-COVID Mike Mikunda of the Mortgage Business Expo (MBE) runs us through the new normal for the mortgage event space What role will events play in the postCOVID landscape?

As with the entire country, the government’s ‘roadmap to recovery’ was welcomed by event organisers whose regular business has been entirely on hold for the past year. Good progress is being made for the lifting of restrictions, with more expected to be eased over the coming weeks in order to return to normality as the roadmap continues to progress into the final stages. Everyone is looking forward to seeing friends and relatives indoors, as well as the reopening of cinemas and theatres and a potential return of holidays abroad. The sentiment across the events sector is very much that people are desperate to get back to face-to-face business. There has been no industry event since 2019, but businesses have still been developing new products and services, which they rely on MBE as a platform to showcase. Whilst the industry has remained buoyant throughout the pandemic, with an uplift in home purchases which can partly be attributed to the stamp duty relaxations, we know how important it is for people to be able to see each other face-to-face and discuss business cases. We have seen great interest from visitors, so we are anticipating good visitor footfall, as they’ve been awaiting the first opportunity to see first-hand the latest products and services on the market since our last event in 2019. Can virtual and live events co-exist? Business has adjusted to working remotely, which looks set to continue for some time longer, and to a new way of adaptable working – to this end, we plan to extend our offering to beyond the physical day at the show by introducing some hybrid elements, but it will still very much be the live Expo platform that our audience wants and expects. How safe can you make live events? The industry’s association – in collaboration with leading organisers – have developed the All Secure Standard as a minimum set of guidelines which the entire industry will adhere to. These put in place necessary measures for cleaning and hygiene, personal sanitising, rapid testing, mask wearing and social distancing, and are being constantly reviewed in line with government guidelines. Both exhibitors and visitors can attend with the utmost confidence that restrictions around large gatherings and social distancing are on

MORTGAGE INTRODUCER

MAY 2021

Mike Mikunda

schedule to have been completely lifted, following successful pilot events across all aspects of the events industry. This, in turn, is supported by the assurance that the vaccination programme for the UK adult population will be completed in line with the government’s July target. In the last few weeks alone, we have seen spectators welcomed back for football at Wembley, snooker at the Crucible, a nightclub and cinema, and more importantly for us, a business event for 1,000 people, seated indoor and mixing.

Will COVID-19 restrictions change the feel of a live event? We aim to host events that have the same live feel as before the pandemic. People have been used to restrictions in their daily life, so there is a possibility of small changes in line with this in terms of spacing to help ensure delegates feel comfortable, and refreshments are likely to be pre-packaged. Will the key ingredients that make live events unique remain the same? In short, yes. Nothing can replace a face-to-face meeting, and attendees will ﬁnd a range of exhibitors from which they can discover new solutions and innovations that help drive the market forward. The Continued Professional Development (CPD) accredited seminars will educate and inform, and naturally the opportunity to network with their peers is unrivalled. Why should brokers be looking to go to live events? Live events enable visitors to cover a lot of ground in one visit. Visitors can discover new exhibitors, products and services, and can speak with a large number of solution providers in one place, in a comfortable face-to-face setting that it is not possible to recreate virtually. Brokers can update their knowledge and also earn hours towards their CPD in the free to attend seminars. This gives them the opportunity to also pose questions to panels of experts and discuss pertinent issues with them in a live environment. Then, of course, there is the huge value of networking – not only with exhibitors, but with their industry peers, providing a valuable and spontaneous sharing of information that is not accessible in a virtual environment. M I www.mortgageintroducer.com

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Mortgage Business Expo has grown to become the biggest and most essential meeting place for the financial intermediary market. MBE is a dedicated event for mortgage practitioners and professionals providing opportunities, forecasts and trends for the UK mortgage and specialist lending markets.

Why do visitors attend MBE: • • • • • • •

78% of visitors establish new business contacts at MBE 79% want to expand upon the services that they offer their clients 56% want to talk to their existing suppliers 87% of attendees surveyed are looking for new avenues for their business 67% are looking to network 45% seek new partners for hard to place cases 42% state that MBE is the only event of its type they visit

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‘The key benefit to MBE is that you see more mortgage brokers here than you would do at any other exhibition in the UK’

‘…great opportunity to speak to lenders and make some new contacts’ Neil Bates, Mortgage Hunters Financial Services

Charlie Palmer, IFAC

hello@mortgagebusinessexpo.com | +44 (0)7785 755087 mortgagebusinessexpo.com

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Discover more at www.kensingtonmortgages.co.uk/intermediaries or call us on 0800 111 020 #KensingtonDifference Kensington and Kensington Mortgages are trading names of Kensington Mortgage Company Limited. Registered in England & Wales: Company No. 03049877. Registered address: Ascot House, Maidenhead Office Park, Maidenhead SL6 3QQ. Kensington Mortgage Company Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 310336). Some investment mortgage contracts are not regulated by the FCA. THIS INFORMATION IS FOR INTERMEDIARIES ONLY

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