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March 2022
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What does andcrafted mortgage solutions mean? We don’t have a one size fits all approach to specialist buy to let and residential cases. In fact, whilst some lenders may not be able to help, we look at each case individually to see if we can provide a solution.
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Champion of the Mortgage Professional
MORTGAGE
INTRODUCER www.mortgageintroducer.com
March 2022
LATER
LIFE A mature market for the next generation
Robert Sinclair The Outlaw Loan Introducer
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Buy to let mortgages
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EDITORIAL
COMMENT
Ryan Fowler RyanFowlerMI
Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com UK Editor Jessica Bird Jessicab@sfintroducer.com Deputy News Editor Jake Carter Jake@mortgageintroducer.com Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Jordan Ashford Jordan@mortgageintroducer.com Campaign Manager Esha Gossain Esha@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com CEDAC Media Ltd Signature Tower 42, 25 Old Broad Street London EC2N 1HN Information carried in Mortgage Introducer is checked for accuracy but the views or opinions do not necessarily represent those of CEDAC Media Ltd.
Farewell from me...
T
his year would have marked a decade of my employment with Mortgage Introducer. It was a different market when I joined the publication. Many of the same faces, though! During my time I’ve been privileged to work with some great people. As many of you may remember, I started as a reporter on the magazine. I was incredibly lucky to have Robyn Hall and Nia Williams as my mentors. Robyn introduced me to a market I knew little about – many of you may say still don’t – and trained me up in the roles that saw me eventually take every editorial position in the business at one stage or another. Meanwhile, Nia has been a constant support during my time with the business – often keeping me on the straight and narrow, and sometimes even in a job. As I depart Mortgage Introducer and look back on the past nine or so years, it’s amazing to see how the market has evolved, and how it continues to confront the challenges it faces and emerge stronger for them. During my time with the magazine, I was privileged to spend a great
deal of time on the specialist finance beat, a part of the market that is light years away from where it was when I first started. There’s a professional, and arguably almost mainstream, market there, and it should be applauded. The changes in the later life space should probably be equally recognised. If I was to name all the people who have helped me in the market over my time here, it would take the entire magazine. I assure you all that it is remembered and, more than anything, appreciated. In closing, I would like to thank my colleagues over the years. Namely Felix Blakeston, Helen Thorne, Matt D. Bond, MI directors Andrew, Ramesh and Marco, Robyn Ashman, Sarah Davidson, Sam Partington, John Hewitt Jones, Jessica Nangle, Jake Carter, and Tolu Akinnugba and Jordan Ashford on the commercial team, to name but a few. Finally, I’d like to thank Jessica Bird who takes over in my stead. Jessica has been an absolute rock over her past two years with us, so you could not be in better hands. Catch you around. M I
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MARCH 2022
MORTGAGE INTRODUCER
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05/01/2022 09:56
MAGAZINE
WHAT’S INSIDE
Contents 24 7 9 15 16 18 19 20 24 32 34 37 41 43
AMI Review Market Review London Review Networks Review Recruitment Review Education Review Technology Review Buy-to-let Review Protection Review General Insurance Review Equity Release Review Conveyancing Review AML Review
44 The Outlaw A fond farewell from our resident outlaw 48 Cover: A market reaching maturity Mortgage Introducer’s panel considers the next phase of the later life market 54 Loan Introducer The latest from the second charge market 58 Specialist Finance Introducer Development finance, bridging finance and more from the specialist market
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09:56
24
BUY-TO-LET
44
THE OUTLAW
17 9
MARKET
54
RECRUITMENT LOAN INTRODUCER
MARCH 2022
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REVIEW
AMI
Too much, too soon Robert Sinclair chief executive officer, AMI
T
he level of change being asked of the industry by the Financial Conduct Authority (FCA) is a significant challenge. Firms are still embedding the Senior Managers and Certification Regime (SM&CR), operating new ways of working post-COVID, applying operational resilience measures, providing enhanced data for authorisations, completing ongoing COVID-19 financial resilience surveys, considering the impact of the new Consumer Duty, reviewing the appointed representative (AR) regime, and considering both the future regulatory framework and how to protect customers from scams. This will be added to in the second half of 2022 by work on diversity and inclusion. The mortgage and protection advice sector, however, does not recognise any of the harms that the FCA and others are citing in order to justify all these changes. Consumers in this sector have low inertia and the market is highly
price and product competitive. It has low levels of complaints beyond administrative, low Financial Ombudsman Service (FOS) complaints, low FOS overturn rates, and only one property scam from 2005/06, settled through Financial Services Compensation Scheme (FSCS) payments. We were not London Capital, Connaught, Woodford or Greensill. AMI continues today to talk to its FCA contacts about firms and products that cause us concern. The time taken to ‘act’ remains extended, to a degree that means consumers risk damage and firms may have to compensate. We are not convinced that the lessons of LC&F and Connaught, which the FCA has acknowledged and which led to a mass clear-out of senior staff, are yet embedded. The FCA remains ponderous and out of touch with the markets it supervises. There are individuals within the FCA who recognise the risks, but claim both process and resource constraints limit their ability to act. AMI agrees that the FSCS funding model needs a radical overhaul. It is not sustainable to levy large amounts for the retail pool at short notice upon firms with no direct responsibility or influence in the relevat areas. Two
HM Treasury must allow the FCA to retain all financial penalties
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things need to have happened for a claim: the firm must have conducted itself so badly it has failed financially – an issue the Prudential Regulation Authority (PRA) and FCA should be closer to than they have been historically – and either had toxic products or given bad advice. Again, these are supervisory matters. As we review the scheme in 2022, as a minimum, HM Treasury must allow the FCA to retain all financial penalties to reduce the amount good firms are being asked to pay. The grab of fines by the Treasury was to avoid banks that had created the 2007/8 financial crisis ‘benefiting’ from the penalties that were anticipated. This did not materialise, but HM Treasury has continued to benefit from other industry misdemeanours. AMI believes that we should return to the original contract, so that the FSCS levy for the innocent is reduced by the fines on the guilty. By making this change, it would reduce the need for deeper structural change beyond a reassessment of categories, limits and class inter-relationships. The simplest solution to ensuring a more durable funding mechanism would be a new product levy paid for by all consumers. This could follow the example set in the travel industry, which is seen not as a tax on customers but as welcome insurance protection. We believe that the cost to the consumer would be circa 0.001% of their loan, which could be blended into the interest rate and collected by the product provider. Similarly, a fractional percentage of invested assets could be levied annually to provide consumer protection. This would also make it clear to consumers which products or services have ‘protection’ and which do not. This would eliminate the uncertainty currently facing firms which know that a levy may be announced later in the year resulting in additional, higher invoices to compensate customers who have experienced harm in other sectors unrelated to their own. M I MARCH 2022 MORTGAGE INTRODUCER
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Mortgage Insider is back. Exploring new trends, success stories and the key issues a�ecting brokers. Out now. Search ‘Mortgage Insider’ wherever you get your podcasts.
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02/03/2022 14:51
REVIEW
MARKET
No reason for confidence to falter Xxxxxxxxxx Craig Calder director of mortgages, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Barclays
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e may now be well into 2022, but that doesn’t stop data being crunched from the back end of 2021, and it would be remiss to ignore these results, as they will continue to shape lending and borrowing conditions in Q1 and beyond.
suggests that first-time buyers outside the traditional hotspot of London are increasingly using shared ownership as a way to get on the property ladder. SHARED OWNERSHIP
Areas of the UK experiencing growth in tenure over the past three years include the South East, where the number of society borrowers rose from 23% in 2019 to 28% in 2021, the East Midlands (8% of borrowers in 2019 to 10% in 2021) and the West Midlands (7% of borrowers to 9%). Meanwhile, the proportion of the society’s shared ownership borrowers
HOUSE PRICES
The latest UK House Price Index from the Office for National Statistics (ONS) and Land Registry outlined that average UK house prices increased by 10.8% over the year to December 2021, up from 10.7% in November. The average UK house price was suggested to reach £275,000 in December, £27,000 higher than at the end of 2020. Average house prices increased over the year by 10.7% in England, 13.0% in Wales, 11.2% in Scotland, and 10.7% in Northern Ireland. The South West was the region with the highest annual house price growth, with average prices increasing by 13.6% in 2021. The lowest annual house price growth was in London, where average prices increased by 5.5% over the year. This represents a significant rise and helps to emphasise one of the major issues facing first-time buyers. A growing housing supply gap, especially at the more affordable end of the market, combined with some lingering affordability issues, does means that some borrowers are facing a challenging set of circumstances. Thankfully, we are operating in a highly competitive and innovative lending environment, which can provide responsible and accessible solutions for an array of borrowers. One of these solutions is shared ownership, as highlighted in data from Leeds Building Society which www.mortgageintroducer.com 14:51
“We are operating in a highly competitive and innovative lending environment which can provide responsible and accessible solutions for an array of borrowers” buying in Greater London has remained steady at 13% over the past three years. However, some areas like the North West (12% of borrowers to 8%) and Yorkshire (6% of borrowers to 5%) saw a fall. An average of three out of five of all shared ownership buyers over the last three years bought homes in UK regions outside London and the South East, with areas including the South West proving popular. One of the main reasons for the rise in prominence of shared ownership is due to incomes failing to keep pace with house prices. This factor continues to place an even greater emphasis on low cost housing to help individuals move into mainstream property ownership, a factor particularly pronounced in London and the South East. VALUE OF ADVICE
As a lender with a history of supporting a variety of affordable housing schemes, raising awareness around shared ownership continues to be of
primary importance to Barclays, and intermediaries play a vital role in this. Of course, this is not a scheme for every homebuyer, but it can offer the right levels of flexibility for a variety of borrowers. Lenders need to work closer than ever with intermediary partners to ensure that greater number of applicable borrowers can access such schemes. The value attached to good, professional intermediary advice continues to rise in a market which is becoming ever more complex for a range of borrowers. This is reflected in the increased business levels experienced throughout 2021 and despite the ending of the stamp duty holiday in Q3, the latest findings from the Intermediary Mortgage Lenders Association (IMLA) suggested that average intermediary caseload volumes reached the highest ever recorded level in Q4. On average, an intermediary now places 103 cases per year, a 32% increase on the yearly average in Q4 2020. With intermediaries keeping busy in the remaining months of 2021, confidence in the business outlook for their own firms also remained strong. Nearly two-thirds (62%) of intermediaries said they were ‘very confident’ about the outlook for their firm, while 98% were confident overall. Furthermore, confidence in the outlook for the broader intermediary sector stayed at a high level, with 96% either ‘very confident’ or ‘confident’ compared to 97% in Q3 2021. Across 2021 as a whole, the business mix advisers handled remained broadly consistent, with residential mortgages taking up 65% of all cases throughout the year, buy-to-let accounting for 27%, and specialist lending 8%. These figures certainly bode well for the year ahead and, on the back of the continued homebuyer and landlord demand that has been experienced over the first few weeks of 2022, there is no reason to suggest that activity or confidence levels are likely to fall anytime soon. M I MARCH 2022 MORTGAGE INTRODUCER
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Visit www.kensingtonmortgages.co.uk/intermediaries THIS INFORMATION IS FOR INTERMEDIARIES ONLY 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.
REVIEW
MARKET
How are you, and can we help? Xxxxxxxxxx Martin Reynolds CEO, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx SimplyBiz Mortgages
T
his article has been written the night before the deadline date to get it included in this month’s magazine. Is this unusual, or just a continuation of doing your homework on the walk to school? Yes and no, but what I think what it does show is the nature of how we work and the pressures we put ourselves under. Some people will call that bad planning, and I’m not going to overly argue with that, but we all want any article to be relevant when it appears, so we leave it as late as possible to write, then normal life gets in the way, and it gets done when the family have gone to bed. ‘Where is he going with this?’ I am sure you are thinking. Well, what I feel we need to consider is how we run our work life, what that does to our home life, and just as importantly what it does to us. How does it make us feel? Actually, how are we? The past 12 months have seen a big push in the industry about how we create a fairer, more transparent
Work-life balance and mental wellbeing are essential
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industry that is inclusive to all. The report published by the Association of Mortgage Intermediaries (AMI) late last year – ‘Diversity, inclusion and equity in the mortgage market’ is a sobering read and, if you have not yet, please take the time to have a look. What it has done is create a starting point for the industry to make change. Working parties have been set up, and I am really energised to see the industry start to take charge. For a few years now, we have also had the Diversity and Inclusivity Finance Forum, which has run events and produced podcasts on many topics – and not just those you would expect. Again, I would suggest that you look some of these up. What I find interesting about them is that they are about people’s journeys, which makes them relatable and also shows that there might be people like you that have progressed. A recent series has been about social mobility. I have found the stories fascinating to hear, and the openness of some senior industry figures has been refreshing to see. How many times have we not gone for job because we don’t think we could do it, even though we are qualified for it – and not just educationally, but also through work experience. How many times have we
felt imposter syndrome about a position in which we have found ourselves? I am sure we have all done this over time – probably many times – and it has turned out well. The issue though is how does it affect us? Does it get easier over time, or worse? The final aspect for me – and something that I feel can be a fallout from both the above and other areas – is mental health. If the past few years have taught us anything, it is how important we are, and that we need to look after ourselves. Isolation, the pressures of home schooling, running business during lockdown, furlough, redundancy, and ensuring that we helped as many clients as possible will have taken its strain. Did we take enough time to look after ourselves? How have our teams coped with this? In October last year, SimplyBiz Mortgages, in conjunction with a number of other industry firms, launched the Mortgage Industry Mental Health Charter, following the sterling work that Jason Berry and the team at Crystal Specialist Finance did in bringing us all together. They had carried out research around the wellbeing of the adviser market during COVID-19, and the perceived lack of support. Mental health and wellbeing are so important, and the charter is open to firms of all sizes. The website is a moving feast and offers ideas and useful hints and tips about how you can support yourself and your teams. Content and links will be updated on a regular basis, and we are keen to hear from anyone who has ideas and support material. It is so important that we look after ourselves and create the right work-life balances and working environments that makes everyone feel comfortable. We all have our own challenges, and we all get there at our own pace, but what is important is keeping the conversation going to ensure the support is there when it is needed, and people are not afraid to ask. So how are you, and can we help? M I MARCH 2022 MORTGAGE INTRODUCER
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REVIEW
MARKET
First-time buyers need first-class support Stuart Miller chief customer officer, Newcastle Building Society
W
ith inflation taking grip and interest rates, according to most commentators, set to increase over this year, it is likely to be even more important that our collective resolve to help people own their own home does not break. First-time buyers face many difficulties, but in many ways are also key to the function of the housing market. Imagination and commitment are key to helping them. FIRST HOMES SCHEME
The government’s long-promised First Homes scheme has now been in action for a little under a year, and we recently completed our first cases in the scheme. It fits squarely within our stable of lending, adding another string to our first-time buyer bow. Over the past several years, we have been steadily developing a range of mortgage products designed to support first-time buyers across the market. No borrower is the same and it’s impossible to offer one solution for buyers facing often very different challenges. In case you didn’t know, the First Homes scheme offers first-time buyers the opportunity to buy a property at a discount of at least 30% against the market value. The discount is preserved by being written into the title registered with the Land Registry, meaning even where the home is sold and a new first-time buyer purchases the property, the new owner also benefits from the discounted price. The aim is to establish First Homes as the preferred affordable housing tenure, and as such the government has set a target for developers in England to
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deliver at least 25% of their affordable housing quotient as First Homes, alongside shared ownership and social rented accommodation. In the context of Help to Buy closing on 31 March 2023, First Homes looks set to be the government’s flagship housing policy. While the scale of the discount is set locally by the relevant council, after the discount has been applied the first sale must be at a price no higher than £250,000, or £420,000 in Greater London. Eligible borrowers must earn less than £80,000 a year, or £90,000 in London.
“We know there are buyers who need help bringing down monthly mortgage payments or help with pulling a deposit together, or who are cash rich but income poor. Those who buy on their own also often face far less flexible affordability than those who buy as a couple” Our commitment to supporting this scheme complements our existing approach to first-time buyer support. We know there are buyers who need help bringing down monthly mortgage payments or help with pulling a deposit together, or who are cash rich but income poor. Those who buy on their own also often face far less flexible affordability than those who buy as a couple. Some buyers scrimp and scrape to save, others rely on the ‘Bank of Mum and Dad’. Others still are lucky enough to receive their inheritance early so grandparents can enjoy seeing them in their first home. How money is given to borrowers can really complicate a mortgage
application, which is why our Family Gifted deposit criteria means any money gifted to the applicant to buy a property can equate to some, or all, of their deposit. There are also borrowers who struggle on their income affordability and there is far less choice for them in the market – especially those on lower salaries at the start of their careers, and people buying on their own without the luxury of two incomes to support the mortgage payments. SINGLE OCCUPYING BORROWER
Our Joint Mortgage Sole Proprietor mortgages offer different support again, by allowing one family member to be added to the loan to support a single occupying borrower. The ownership of the property remains solely in the name of the occupying borrower, but they can use the income of a family member to increase their borrowing capacity to acquire the mortgage. It’s ideal for adult children whose income will rise in the future, but who for a short time need the support of a family member to get onto the property ladder. For those without the luxury of financial support from parents or grandparents, the deposit might be a bigger barrier to purchasing than income and affordability. Our Deposit Unlock scheme helps borrowers secure a new build home up to a value of £600,000 with a deposit of just 5%, an option that will be even more valuable come April next year. We were very proud to be the first lender to offer 95% loan-to-value (LTV) mortgages to buyers of newbuild homes under this innovative mortgage indemnity scheme, developed with the Home Builders Federation and its members. Initially we piloted the scheme to customers buying in the North East, but we have now rolled this out nationwide. Being unable to buy a home can set individuals back financially for the rest of their lives. Richer or poorer, where someone wishes to buy and can show their affordability, with a bit of common-sense, pragmatism and flexibility, we really believe we have a responsibility to help them. M I www.mortgageintroducer.com
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REVIEW
MARKET
Devil will be in the final detail Steve Goodall managing director, e.surv
L
ast month, the government announced plans to introduce tougher rules to force developers and unsafe building materials manufacturers to help foot the bill to make buildings safe. Secretary of State for Levelling Up Michael Gove said the proposed legislation changes would “bring this scandal to an end, protect leaseholders and see the industry work together to deliver a solution.” It’s the latest in a series of moves by the government to appease homeowners who bought properties which were later found to have dangerous cladding or other construction defects, rendering them unmortgageable and therefore effectively worthless. In far too many cases, the firms responsible for manufacturing unsafe business materials have refused to pay up to help make these properties safe, instead relying on developers or building owners to foot the bill. They, in turn, have passed the buck to homeowners, many of whom simply cannot afford to fund the work needed. In some cases, where blocks of flats were sold on a leasehold basis, any works on common areas must be agreed by all leaseholders and the freeholder – including agreeing to pay their share of the cost of the works. That has led to some leaseholders being presented with a bill of anything up to £100,000 – and we’re talking first-time buyers, pensioners, and parents, not a bunch of venture capitalists or movie stars with millions in the bank. Gove claims the proposed measures “will stop building owners passing all costs on to leaseholders and make sure any repairs are proportionate and necessary for their safety.”
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He added: “All industry must play a part, instead of continuing to profit whilst hardworking families struggle.” The headlines have all focused on the implication that any developers or manufacturers found to be shirking their responsibilities – if or when the proposed legislation passes – would be banned from further development. Clearly, it’s in everyone’s interests that this is approved by Parliament, and that the whole sorry saga, which only came to light after the deaths of 72 people in the Grenfell fire in June 2017, comes to a close.
“In far too many cases the firms responsible for manufacturing unsafe materials have refused to pay up to help make these properties safe, instead relying on developers or building owners to foot the bill. They in turn have passed the buck to homeowners” Well, perhaps the manufacturers responsible for producing dangerous building materials won’t be jumping for joy, but for far too long people have been forced to live in unsafe homes through no fault of their own. For lenders with debt secured against affected properties, the fact that Gove is prepared to go this far will be met in some part with a sigh of relief, though buy-to-let (BTL) investors are excluded. The risk balance sheets are exposed to because of dangerous cladding, insufficient cavity wall fire breaks, or foam insulation is significant. Yes leaseholders continue to suffer because of their stake in these properties, but lenders hold the lion’s share of the financial risk if they are never made safe. Sure, they have recourse to the borrower for any unpaid debt – but realistically, which lender is going to
risk the front page of the Daily Mail for insisting a single mum find £250,000 because their home couldn’t be sold? From my own point of view, this announcement poses some interesting questions to consider. First, there is the risk the legislation doesn’t pass with its current full force. Second, should surveyors take into account the law before the works are completed, given they’re definitely going to happen? What does “help” meet the cost of remediation mean? Are leaseholders still going to be on the hook for some of the costs, and if so, how much? This latter point will be crucial when it comes to valuations, because if homeowners still struggle to meet the repair bill, albeit a smaller one, then the problem this legislation is designed to solve will endure. The Royal Institution of Chartered Surveyors (RICS) has been proactive in working with lenders, surveyors and other relevant stakeholders to find workable ways to support homeowners to move or remortgage where buildings meet the criteria for a signed EWS1 form – either the building’s external wall materials are unlikely to support combustion, or combustible materials are present in an external wall, with sub options of either, fire risk is sufficiently low that no remedial works are required, or fire risk is high enough that remedial works are required. The RICS guidance also states: “It is also important to note what the form will not do. It is not a life safety certificate. It is only for the use of a valuer and lender in determining if remediation costs affect value. “Where a building is found to need remedial works this will need to be carried out by the building owner, to ensure safety of the building, before a mortgage can proceed unless the lender agrees otherwise.” Gove’s efforts are indeed welcome, but until we see the ratified bill and understand the financial details, it’s not going to change much, for the time being at least. M I www.mortgageintroducer.com
REVIEW
LONDON
Safe-haven assets Robin Johnson Xxxxxxxxxx managing director,
I
Kinleigh, Folkard and xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Hayward Professional Services
t seems rather ironic that amidst an onslaught of tidings of woe, the housing market is a bright spot. Gas prices are shooting up, there’s a ‘cost of living crisis’ – following hotly on the heels of a health crisis, healthcare crisis, social care crisis, unemployment crisis, financial crisis, energy crisis, petrol crisis, supply chain crisis, food shortage crisis, lorry driver crisis, climate crisis… – and in April we have more National Insurance to pay, not to mention inflation and the situation in the Ukraine. Perhaps a glimmer of worry for those of us in the housing market could be argued in the shape of two base rate rises and another two set to come this year, if markets are to be believed. When are we going to start hearing about the interest rate crisis, I wonder? Yet, like the run on petrol stations in autumn last year and our now wellstocked supermarket shelves, let’s just get this in perspective, shall we? Inflation is a concern, yes, and interest rates rising will mean some people paying more on their mortgages. But even 1% is still ridiculously low. Just because anyone in their 20s can’t remember when mortgage rates at 7% were considered a good deal, doesn’t mean they weren’t. Mortgage affordability on 2-year fixed or variable
rates is going to feel some pressure this year, true, but on 5-year-plus terms, stress-testing becomes irrelevant. Those in a position to buy a home, or upsize to a larger one to accommodate a growing family, are almost certainly still going to be in a position to do so at the end of this year as at the beginning. Borrowers adjust to rate rises, as does the wider economy. Higher taxes will hurt, but it’s the lowest earners who will really feel the pinch from inflation and tax hikes. I suspect 20 and 30-somethings saving hard for their deposit will also feel the economic shifts more acutely than other buyers. And then, it’s more likely to be those in areas of the country where incomes and house prices are lower; the fact is, to buy in London or the South East, we’re talking sums of money that can be afforded only by those earning considerably more than the average salary. That, or there’s family money, inheritances, or winning the lottery. I don’t mean to sound flippant – this is a situation which points to material social division and a rapidly widening gulf in the wealth and financial stability long-term of Britain’s richest and poorest. It is an injustice which must be solved by governments, however. The reality is that current policy supports rising house prices. BRICK AND MORTAR APPEAL
The latest figures from the Office for National Statistics (ONS) recorded a 10.7% rise in average house prices in England over the year to December
The average first-time buyer purchasing in London paid £450,361 in December 2021
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2021, marking an ongoing mismatch in supply and demand. In London, perhaps constrained by affordability, average house prices increased by 5.5% in the year to December 2021, still an unusually strong number. Even so, the average first-time buyer purchasing in London paid £450,361, while owner-occupiers moving house forked out an average £598,059. Continuing the anecdotal trend for moving to larger homes with outside space to accommodate remote working, across England the ONS data showed that detached houses saw the biggest increase out of all property types, up by 15.4% in the year to December 2021, to £468,000. The lowest annual change was in flats and maisonettes, which increased by 5.6% in the year to December 2021 to £245,000. Halifax analysis showed, unsurprisingly, that the most expensive detached residences are in London, at an average £910,568. Their rate of increase (12.4%) was almost double the average of all other property types in the capital. What next, then? Can the market keep this up all year? Maybe not. The past 18 months have been artificially buoyant because the stamp duty holiday and the pandemic turning our lives upside down. This latter factor is one I think will endure over the coming year or two; there remain bottlenecks in some parts of the market, and a shortage of housing stock has definitely put a brake on many people’s moving plans. As inflation and global political instability erode the returns in equities, money is once again turning to investment in property – there are new lenders waiting to launch even as I write – and this will in turn act to support prices. House price inflation may fall back gently over the year as things get back to ‘normal’ again, whatever that means for us all, but bricks and mortar have not lost their appeal. M I MARCH 2022 MORTGAGE INTRODUCER
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NETWORKS
Keep communication simple Shaun Almond Xxxxxxxxxx managing director, xxxxxxxxxxxxxxxx, HL Partnership xxxxxxxxxxxxxxxx
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oor communication can have drastic consequences. On the night of April 23 1991, Gerald Ratner, then CEO of national high street jeweller Ratners, began a speech to the Institute of Directors highlighting the event’s thematic values of quality, choice, and prosperity. On the prior advice of a speechwriter, he put in a couple of jokes: “Ratners doesn’t represent prosperity — and come to think of it, it has very little to do with quality as well. People say, ‘How can you sell this for such a low price?’ I say, because it’s total rubbish.” Then, several minutes later, just for good measure, he said: “We even sell a pair of earrings for under £1, and some people say, ‘That’s cheaper than a prawn sandwich!’…I have to say, the sandwich will probably last longer than the earrings.” Within a few days of the speech, Ratners Group shares dropped by £500m, and by the end of 1991, its stock was down 80%, accordin to the New York Times. In the financial services industry, there is little doubt that poor communication, or the lack of it, can lead to misunderstandings and wrong assumptions, which in turn lead to bad outcomes for clients and potential brand damage for firms. CLEAR COMMUNICATION
The whole question of the importance of clear communication, written or oral, when working with clients, has been given particular prominence as the industry integrates the new Consumer Duty rules into its compliance regimes. The Financial Conduct Authority (FCA) wants all parts of the advice chain – especially the providers, advisers and networks – to strive for a much higher level of analysis and advice in our dealings with customers,
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and that will now also incorporate how we communicate. Of the seven principles that underwrite the basic requirements of regulated firms and individuals, Principle 7 in respect of communication with clients states: “A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.” It also expects that written or oral communication – in whatever format – be inclusive. There is now, however, an added expectation that we should take a lead from the Royal College of Communications speech and language therapists’ Inclusive Communication Standards, launched last year.
“In most cases, it’s not the nature or delivery method of the message itself that is at fault. Instead, it is an actual lack of communication before and after recommendation that causes the greatest risk to customers. Of course, we must continually review our communication standards and always be prepared to improve our delivery” No one can possibly object to the concept of clear and concise dialogue, and I have no doubt that we all strive to ensure we communicate in terms that our customers understand on subjects that we feel are necessary to ensure there is no doubt about what is needed to create a good customer outcome. It is also right that the regulator should draw to our attention to the need to constantly review documentation, how we describe the features and benefits – and potential drawbacks – of the products being recommended, and also how we
endeavour to ensure that customer agreement to a course of action has been reached because they feel confident in the explanations and information which has been laid before them. COMMUNICATION STANDARDS
The idea of setting a benchmark, as defined by the Royal College of Communications speech and language therapists’ Inclusive Communication Standards, would also seem a sensible approach. However, there is no onesize-fits-all template for communication that will suit every client. If it is intended as a guide, I think the Royal College can provide a welcome resource. However, there is a danger that if it is adopted as a dedicated standard, we could end up creating a situation where failure to comply just gives more excuses to mount cases of misselling. Also, who will judge whether some communications meet the standards required and others do not? Do we create yet another independent body to arbitrate, when we are perceived to get it wrong, which in turn becomes yet another cost charged to the industry? We, therefore, need to consider customer reactions to a communication standard carefully before nailing our colours to the mast of a single ‘standard’. Instead, our guiding thoughts should be simplicity and clarity, with the ‘keep it simple’ principle always in mind. In most cases, it’s not the nature or delivery method of the message itself that is at fault. Instead, it is an actual lack of communication before and after recommendation which causes the greatest risk to customers. Of course, we must continually review our communication standards and always be prepared to improve our delivery. Meanwhile, Principle 7, outlining the conduct expected, is surely still more than sufficient to meet the FCA’s goals? M I www.mortgageintroducer.com
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RECRUITMENT
How do start-ups attract the talent? excited by the prospect of being part of something innovative. Pete Gwilliam director, Virtus Search
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ost successful start-ups are founded on the big impact that talent brought in at the outset has on shaping the growth story. A great business will understand the blend of skills and attitudes that will ensure the whole is greater than the sum of its parts. The current recruitment market is incredibly competitive, with lots of lenders hunting for the same talent, and in many cases competing for the same individuals. ATTRACTING TALENT
Both established businesses and new entrants are finding attracting talent difficult, but for differing reasons. When you talk to candidates about moving to an established lender, the big debate about the merits of moving often comes down to what the new employer and role is going to offer that is suitably different to what they have now. Clearly, it is easier for a startup to offer a much more dynamic, flexible and entrepreneurial culture, and definitely in start-ups there’s an unrivalled opportunity to own a key area and be instrumental in shaping the future. However, as a start-up business isn’t yet a household name, it doesn’t offer the comfort of established brands. Of course, it should also be appreciated that it is a greater risk for candidates to join a company they’ve never heard of that is in the early stages of growth. Therefore, start-ups really need to consider what sets them apart from their competitors – new and prominent lenders alike. As a start-up, the mission, values and culture will be a big pull for candidates
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EMPLOYEE VALUE
An employee value proposition (EVP) is the total of the benefits an employee gets in exchange for dedicating their time, skills and experience to a company. Being clear on this from the outset provides the foundations for employer brand perceptions. The EVP will be a guideline for company culture, how employees are treated, and what is expected from them, all of which is important when trying to differentiate and build an employer brand.
“Start-ups really need to consider what sets them apart from their competitors – new and prominent lenders alike. As a start-up, the mission, values and culture will be a big pull for candidates excited by the prospect of being part of something innovative” By articulating the vision and mission of the business, and what it stands for, this helps individuals to find a reason to connect with those values and feel invested in the culture and mission. This often ensures better quality hires and improved retention, because likeminded candidates will care about the value their work brings and how fulfilled they feel, rather than just being attracted by a financial offer RECRUITING RIGHT
As a start-up, the leadership team wears many hats, including finding funding, growing the proposition and creating brand awareness.
When scaling and building teams, hiring individuals based on references from personal networks is often a tactic, but this creates two issues that can have an ongoing impact into the future. Firstly, personal networks are useful but often flawed when it comes to appealing to a diverse range of experiences, which can be a threat to how inclusive the business will be, and how representative the employee mix is of the brand values. Moreover, however reliable the referral may be, a lot of the commentary about an individual surrounds how effective they have been in an entirely different business model, and thereby the need to test that individual’s aptitude for working in a growth-focused and agile world can be skirted over. In a rapidly growing business, recruiting the wrong person not just fails to optimise the role, but can cost time, money and reputation, which can get undermined by not having the right person in critical external facing roles. Hires that are respected in the industry can be a catalyst for what follows both in terms of the quality of work delivered and how others feel about working for that company. However, the reverse is also true, especially if the challenges of adapting to a start-up mindset are not assessed in the selection process, such that people hired do not adapt to change and the differences in shaping a role, rather than working within a more formulaic established role. The recurring theme in start-ups that I have seen flourish over the years has been how important these early hires are for the company. Just as there is a lack of talent, there is a huge increase in companies recruiting and searching for the same talent. This causes a problem for start-ups, as candidates may never have heard of the business and may be nervous about joining in its infancy. There is a tendency to concentrate on overcompensation for this in financial terms, and this balancing of risk and reward – and the very competitive recruitment market at the moment – mean that wages are ‘running hot’! M I www.mortgageintroducer.com
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EDUCATION
Education is key to good protection advice Gordon Reid business development manager, learning and development, LIBF
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ortgage advisers face many challenges when ensuring their customers have adequate financial protection, and yet – with rising inflation and a weakening economy – there’s arguably never been a time when cover was more important. Many mortgage borrowers continue to have inadequate protection, or indeed none, and that’s why many mortgage advisers would benefit from improving their knowledge and skills in this area. The mortgage and protection industry is extremely complex. As an authorised mortgage adviser, you’ll have completed a Level 3 qualification, which included a section on protection products. This will have given you a basic understanding. It is very likely that, as part of your role, you talk to your customers about their need for financial protection. But how much of a priority is this? Do the processes involved make this conversation easy for you and your customer? How are you supported to have these – potentially quite difficult – discussions by your colleagues, your firm or network? DIFFERENT KINDS OF ADVICE
Advising on protection is very different to advising on a mortgage. Let’s look at why. For many borrowers, their biggest concern is whether they can afford their mortgage. Nobody really wants a mortgage; they aspire to live in the home that the mortgage allows them to purchase. So a mortgage, whilst undesirable, has a tangible purpose. www.mortgageintroducer.com
Financial protection, on the other hand, has no such attraction. That’s why you need a completely different set of skills to help your customer – skills that help you explain why they need protection products. Many customers won’t see the need for additional products, which they’re likely to perceive as just adding to their monthly outgoings. Even when a customer does understand the need for protection, the selection of products is complicated. While the basic types of products are relatively simple, there are so many sub-products it’s not always easy for an adviser, let alone their customer, to be sure which is right. The detail behind the products is often laced with jargon, complex terms and acronyms, which you need to both understand and be able to explain – in plain English. If you’re a tied agent, you’re obviously only able to advise on the protection products of one provider. This at least means you only have to understand one company’s terms and language. But if you’re an independent protection adviser, you’ll have to navigate the complex array of products, because cover with the same name from different companies often contains different terms, conditions or limits. To really support your customers, you need a combination of emotional intelligence, people skills and a solid understanding of the products in the market. Without the right skills and knowledge, you’ll struggle to help your customers make the best choices about the amount and type of cover that’s right for them. EXPLAINING IN PLAIN ENGLISH
I know a protection adviser who refers to life cover, as ‘love cover’. Instead of referring to critical illness cover, she initially talks about ‘cancer cover’. This is not about misleading her customers; it’s about talking in a language that
they understand and highlighting some of the key reasons people need protection – that is, to look after their loved ones and to help them and their families if they ever get cancer. Interestingly, where customers are concerned, the first thing they need your help with is in understanding what is meant by ‘protection’. This is a word that means different things to different people. The first thing that will spring to many people’s minds when they hear the word ‘protection’ will be images of bouncers or security guards, not financial products.
“To really support your customers you need a combination of emotional intelligence, people skills and a solid understanding of the products in the market” For some people it’s difficult to face up to the grim possibility that they may one day become ill, or be unable to work, have an accident or even die. These are sensitive topics that aren’t necessarily easy to talk about. But your clients need to be ready for these eventualities, so it’s part of our responsibility as mortgage and protection advisers to help them consider what might happen to them and their family in such circumstances. That takes skill and practice. You may have customers who think they’re not eligible for cover, perhaps because of their age or a pre-existing health condition. Again, the solution is to have a clear understanding of the circumstances and explain what can be achieved, as well as the implications of doing nothing. To help you with this side of your business, you may want to consider a specialist qualification such as the Certificate in Protection (CertPro) either for you or someone in your firm. Dedicated learning will give you confidence that you’re securing the best outcomes for customers at a time of economic uncertainty, while adequate comprehensive financial protection will give customers peace of mind whatever the future holds. M I MARCH 2022 MORTGAGE INTRODUCER
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TECHNOLOGY
As lending evolves, we watch carefully Steve Carruthers principal mortgage consultant, Iress
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s we approach the end of the first quarter of 2022, our minds are turning to our next Mortgage Efficiency Survey (MES). Planning is well underway, and we will be in contact in March with many of you reading this. As usual, I am hugely grateful for everyone’s participation and co-operation, whih are the key ingredients in making this one of the most anticipated lender reports of the year. We have worked very hard over the past couple of years to ensure the market has a thorough understanding, through the MES, of the issues and concerns facing lenders over what has been an incredibly challenging period. LENDER SOLUTIONS
In a crisis, what we have discovered is that, at a high level, the issues facing lenders are very common. Margins, funding, distribution, technology and operations are areas that affect everyone. But how lenders decide to deal with a crisis like a pandemic is where they differ. The solutions they adopt and the pace at which they can implement them are affected by the dynamics of the markets in which they operate, the dynamics of their own organisations, and the dynamics of the funding they have. There’s a common misconception that all lenders are pretty much the same. Lenders may share characteristics – mutuality being one example – or issues, such as funding constraints, but anyone who has really listened properly understands the considerable nuances that affect decision-making, and the constraints
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that shape the action an organisation can take. And challenges there are! From delivering greener practices to more mindful staff welfare, diversity and inclusion governance, the background of lending is as complex as it has ever been. This is before we look at what is happening in the market, in the regulatory world or to business as a whole. The flurry of new lenders, some fintech, others new lending propositions, is a sign that even if the
“Vanilla lending is not what it used to be. More imminent competition, new markets and more complex underwriting means technology will be important for those wishing to deliver efficient lending – especially if these lenders do not have the scale, resources, or willingness to ramp up team numbers” market remains resilient there are going to be more lending mouths to feed, from a pie that many believe is likely to resemble 2019 lending ambitions. The challenge for lenders, in terms of mortgage origination, is knowing what markets they want to be in, where they can add value to borrowers, and how automated their approach should be. We know that vanilla lending is not what it used to be, and that recent history will impact underwriting assessments for a while to come. More imminent competition, new markets and more complex underwriting means technology will be important for those wishing to deliver efficient lending – especially if lenders do not have the scale, resources, or willingness to ramp up team numbers.
We will be tweaking the themes of the MES this year to reflect what is happening now in 2022 and expectations for 2023, as these elements will define what lenders decide to do now. Our own experience is that technology ambitions are being thrust to the fore again – not because of COVID-19, but because of the evolution expected and the relative scarcity of human resources to deliver everything that is needed to thrive. People will be increasingly employed delivering the things machines cannot. PLUG AND PLAY
Depending on lending appetite, market, and distribution, the role of technology will subtly shift. For those with more niche or focused aspirations, a mix of plug and play solutions may hold the answers. Whatever kind of organisation you are part of, technology planning is about understanding how the first key stroke of an affordability calculation interacts and supports the final onboarding of a completion onto a core banking system, and how the interoperability in that process delivers the decisions you need. What are the objectives and interdependencies, and are they even the right ones to futureproof your business? Interoperability is a particularly key point – especially with an increasing number of cloud-based solutions offering lenders new choices, from the initial interaction with brokers and borrowers to the referencing of external datasets and even final onboarding to core banking platforms. Data and the infrastructure that allows us to access and understand it in volume has moved on at pace – in no small part because of the pandemic. Planning, managing, and delivering the functionality that offers the ability to scale and flex and change propositions quickly and at lower cost have become business as usual for all lenders. This year’s MES will attempt to address some of these questions, as well as establish the actual daily trends that tell their own stories. One thing is for sure, thanks to your help we will all be better placed to make better decisions as a result! M I www.mortgageintroducer.com
REVIEW
TECHNOLOGY
A unique moment for tech Jerry Mulle UK managing director, Ohpen
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s the leader of a mortgage technology company, you might expect me to write very specifically about the opportunities available to all lenders now through SaaS cloud-native technology. Of course, I will. But it is incredibly important that our clients know we understand the UK market context of our technology, and the ramifications of that for supporting the decisions they make. So, why might a lender of any size look for an opportunity to abandon legacy systems, upgrade costs, and a lack of interoperability to embrace cloud-native solutions and forego expensive legacy contracts? INFRASTRUCTURE
After all, what challenges might lenders face that could possibly require an IT infrastructure to deliver scale and flexibility, and quick and affordable changes to product propositions, such as complex criteria changes, multiple interest rate calculations or regulatory changes? Allow me to explain. At first glance, you might be forgiven for thinking an economy undergoing higher inflation, higher interest rates and a squeeze on living standards might be bad news for lending and the housing market. But the reality this year so far is very different. We expected a remortgage boom in the first quarter – which might turn out to be a product transfer boom – but home-moving has continued at a healthy pace. Many commentators believe lending will be as robust as 2019 levels. Supporting this is the continued, albeit now more subdued, rise in house price growth across the UK, which suggests the pandemic continues to inspire people to move home. www.mortgageintroducer.com
The ‘race for space’ and need for domestic work and living space means there is lack of ideal stock, which is fuelling prices. Equally, the need to return to work has also meant a demand for homes in commuter belts. The pressure on other asset classes, such as equities, and the continuing good performance of UK housing, is attracting the attention of investors who, amidst the predicted falling returns of profits from large companies, are now eyeing UK property. Diminishing shareholder returns will once again focus attention on property as an asset class.
“You might be forgiven for thinking an economy undergoing higher inflation, higher interest rates and a squeeze on living standards might be bad news for lending and the housing market” Some of us may remember the last time investment banks entered the market with such gusto, but there are good reasons for them to do so again. The regulation of the UK market is tighter, but the prospects for returns remain strong. During the credit crisis, UK property was unfairly tarnished as it became caught up in the chaos of the US property market. Even then, UK residential mortgage-backed securities (RMBS) performed well by comparison. Today, with global investment banks already backing permanent inflation as an economic force for a couple of years to come, some are known to be bringing lenders to the market as they eye the capital and rental returns. It’s a good bet. A finite resource with massive demand means prices, as we have seen, are holding up. The type of lending they want to do may force change among current participants. Invariably, this means
more lenders fighting over a pie that many expect to be akin to 2019 lending volumes. It may be that not all the pie is wanted, either – securitisation markets are already rewarding issuers of ‘greener’ assets. But we should also be ready for this growth in competition to deliver better credit terms for borrowers. For all lenders, having product propositions they can flex quickly, and people focused on the right things, necessitates operational systems, processes and infrastructure that can react quickly to changes in scale, distribution and regulation. The Bank of England is reviewing the withdrawal of its affordability test for new mortgages, and at the end of this year probably the most significant change to global interest rates will have been completed. All lenders are transitioning from LIBOR-based products to rates using SONIA. While the transition for many products was the at the end of 2021, regulators are encouraging firms yet to achieve this to transition from legacy sterling LIBOR contracts using the temporary synthetic LIBOR to SONIA. Synthetic LIBOR is not guaranteed to be available after 2022. STRATEGY
Clearly, there is much to think about, and in managing this kind of change and deciding on your business strategy, being able to scale, flex and deliver your plans affordably is no longer a lending ‘nice to have’. Whether it is on the demand side, where the market for borrowing is set to remain steadfastly resilient as people seek to rebalance their personal borrowings, or on the supply side, with more lenders chasing less business and regulatory drivers determining the need for quicker systems and product evolution, there is arguably a window this year for many lenders to take advantage of the scalable solutions that are both available and affordable. There, I told you I would get to technology eventually. M I MARCH 2022 MORTGAGE INTRODUCER
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TECHNOLOGY
Lessons from the buy-to-let market Mark Blackwell chief operating officer, CoreLogic
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here has been little argument that data plays an important part in lenders’ determination of value, but that decision becomes harder when you begin to assess a portfolio of loans and try to understand what is going on within it. It’s made more difficult if you do not have access to the infrastructure that supports the collection, collation, assessing and decision-making in the first place. The buy-to-let (BTL) market offers a good example of how data and systems interoperability can change your ability to understand a market and do business. The buy-to-let property market boomed last year. According to UK Finance, purchase activity increased to £18bn in 2021 – up by a colossal 83% on activity in 2020. Now, while you might assume the current bout of rising inflation and interest rates might deter property investors, there are a lot of reasons why this is not likely to be the case. As inflation takes hold, many landlords are seeing it result in higher wages, which in turn impacts rents, bringing higher yields back to the sector. This will encourage more investment activity, not only from established landlords but also from new players, such as investment banks, which will see the benefit of funding the market if yields improve, while declining in other asset classes. But it is not one way traffic, which is why BTL promises to be a fascinating market that will continue to command due care and attention from those financing it.
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One of the biggest challenges facing landlords is the requirement to comply with the legislation regarding Energy performance Certifcate (EPC) scores in line with the government’s intended target of raising the certification rating to a ‘C’ by 2025. Some estimates put the estimated number of rental properties that would currently fail to achieve the required grade at more than three million. When you consider the cost of retrofitting improvements to these properties, it’s easy to see why this is not a small issue, and why lenders might suddenly feel exposed on any loans they have. Regulation is set to favour the future building of high-EPC properties, and lenders should arguably be ready for lower-EPC properties to continue to fall in both the residential and buy-to-let markets. There is plenty of evidence to suggest more than a cursory check might be appropriate. One 2020 study concluded that UK homes were losing heat up to three times faster than European properties, partly due to the fact that 38% of the UK’s housing stock was built before 1946. The Royal Institute of British Architects (RIBA) also raised the issue of England’s millions of homes built in the interwar period, calling for policies to incentivise private owners – who reportedly own more than 70% of these properties – to fund the installation of insulation, double or triple-glazing, and replace old gas boilers, which the professional body estimated could cost £38bn. Understanding the lending risk is therefore critical, but we know from experience that this kind of information does not exist within legacy systems. CALL ON US
Our Buy To Let Hub is a web-based desktop platform that helps lenders comply with the Prudential Regulatory Authority’s (PRA) SS13/16 portfolio
landlord underwriting standards. It is designed to deliver the very collation and assessment of complex and multiple data that speeds up the underwriting process and significantly reduces the administrative burden on brokers when submitting BTL portfolios to lenders. Lenders can configure their own rules around interest coverage ratios (ICRs) and loan-to-alue (LTV) exposures in real-time to reflect their own risk appetite and actual exposure. The software also provides brokers
“While you might assume the current bout of rising inflation and interest rates might deter property investors, there are a lot of reasons why this is not likely to be the case. As inflation takes hold, many landlords are seeing it result in higher wages, which in turn impacts rents, bringing higher yields back to the sector” the ability to easily import landlord data from multiple sources, which is automatically verified and converted into lender-specific templates, before an application is submitted. Perhaps one of the most valuable points this service makes is that increasingly diverse sources of information need to be assessed outside the current legacy framework. Multiple properties, with multiple data points, require technology that allows lenders to interoperate with these sources and decision-making tools if they choose. Being able to see current EPC ratings against each property in a portfolio is one such data point, among many. The BTL market promises to be a buoyant one, but it highlights an interesting point about how issues of government policy are changing the nature of lending risk, and that internal legacy systems will not swiftly and affordably make the leap to be part of the new world. Of course, if you need to be a part of it you can always call upon us. M I www.mortgageintroducer.com
REVIEW
TECHNOLOGY
Your call is important to us…. Xxxxxxxxxx Tim Hague director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Sagis
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orgive the slightly sideways entry into this month’s missive, but there’s a salutary lesson in here which anyone providing a service will recognise only too well. Let me explain. I was recently due to fly to Schiphol on the 6.15am KLM flight. Having had a relatively smooth check in once on the plane, fog in Amsterdam resulted in the plane waiting on the tarmac for an hour, during which time a technical fault occurred. Cue, disembarkation. Except that the lack of steps – yes, steps – meant another hour on the tarmac. The staff on the plane were great – empathic, apologetic and seemingly genuinely concerned for their passengers. Finally off the plane and more than a hundred bleary-eyed and pretty annoyed passengers – along with my good self – were held at the departure gate for almost another hour while they sorted out getting people back to the check-in area, having collected their bags, to check in again and check their bags in again on replacement flights. I’d already been automatically booked onto the next available flight, but by this time my meeting had been cancelled because I wouldn’t be arriving in The Hague until midafternoon, by which time I’d need to turn around and fly back. You can see where this is going – I had to cancel my automated check-in, in order to then cancel my flights. Even with the best of intentions, the process was already extremely clunky and designed for ease rather than customer experience. It got worse… Having eventually worked out how to cancel my checkin – a trial of considerable complexity – the system refused to let me cancel either flight. So, I tried calling the www.mortgageintroducer.com
customer service number. Obligatory button pressing for five minutes, only to be told they were very busy, the waiting time was more than 45 minutes, and they were terminating my call. After three or four attempts, I gave up and left the airport. An hour later – after my rearranged flight was due to take off, so the anxiety levels were rising – and after a comparably short 12 minute wait, I got through, explained the details. They started to cancel everything, and then the line went dead. And, repeat.
“Automating parts of an operation can make good sense, creating efficiencies, consistency of service and a very helpful paper trail. But in adopting better technology, firms have to be really on the ball to avoid the ‘computer says no’ trap” Having had time to reflect, this is an all too common experience we all have, whether it’s with airlines, energy companies or mobile phone operators – I realise that good customer service can’t just be about the front line staff. It extends from the purchasing experience, through to the service provision, and crucially to the service offered when something doesn’t go according to plan. When things go wrong, and they do, it’s often how we recover a problem that can make or break a customer relationship. AUTOMATION IN HARMONY
Part of this comes down to technology – automating parts of an operation can make good sense, creating efficiencies, consistency of service and a very helpful paper trail. But in adopting better technology, firms have to be really on the ball to avoid the ‘computer says no’ trap.
It is crucial that firms understand how technology and humans can work in harmony. Technology should support the business strategy and enhance, rather than compromise the customer experience. Customers shape their expectations from all sorts of life experiences. Take Deliveroo or Uber, for example. These companies have nailed the use of technology to create a brilliant user experience, from ordering, paying, receiving the service, updates on when it’ll be delivered, to the ability to resolve things quickly and easily when mistakes are made. Good customer service is vital to survival, and the past two years have served to remind us all of just how important a good impression can be. The pandemic, lockdowns and the rapid transition to large numbers of people working from home has been a bump in the road for customer service in my view. How many times have you been fobbed off with the excuse “COVID made it happen” when a company fails in its duty to provide the service you’ve bought? The frustrations are real, and customers understandably believe we have had more than enough time to put appropriate responses in place. What does my abandoned flight to the Netherlands, or last night’s cheeky takeaway, have to do with mortgages? Lenders and brokers are on the front line in an industry that, unfortunately, is known for its often appalling customer experience. Like the dedicated flight crews who do their best to make a journey as comfortable as possible, lender staff and brokers do their very best to make the mortgage journey as comfortable as possible for borrowers. The nature of housing transactions is inherently complex, lengthy and involves considerable red tape which has to be dealt with. We have to make sure technology and operational processes give our people the best tools to help them give great service. M I MARCH 2022 MORTGAGE INTRODUCER
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BUY-TO-LET
Why HMOs are hot property Richard Rowntree Xxxxxxxxxx managing director xxxxxxxxxxxxxxxx, of mortgages, xxxxxxxxxxxxxxxx Paragon
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ccording to Zoopla estimates, during the pandemic four in 10 homeowners have altered their homes to better suit their needs, resulting in the loss of almost nine million bedrooms. The repurposing of properties is something that we have seen for some time within the private rented sector (PRS), typically with more seasoned investors reconfiguring larger houses to enable them to be let to multiple independent tenants. Recently, when analysing our own book, we’ve identified an increase in investment in these types of properties. SECTOR SHIFT
While this could be in part attributed to our product offering being simplified, with discounts based on energy efficiency rather that property type, industry data shows that the shift is being seen across the sector. In December 2021, the value of mortgages written for the purchase of houses in multiple occupation (HMOs) was more than twice as much as the same time a year earlier, and almost double December 2019, before the market was impacted by the pandemic. This is likely to be driven by a number of factors, one of which is increased demand for affordable homes. Paragon research shows that tenant demand has been steadily growing since midway through 2020, and hit an all-time high in Q3 2021, remaining elevated since. In the height of the pandemic, when social distancing was a mandated measure, there were questions on whether the inevitable
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mixing with other tenants would put some people off. This didn’t appear to be the case, and it actually may have worked the other way, with some preferring the communal nature at a time when lockdowns left many feeling alone and isolated. Fastforward to today, and tenants have less to spend on rent due to the current increases in the cost of living. With HMOs and multi-unit blocks (MUBs) often being a more affordable option compared to letting an entire flat or house, we can see how landlords could be responding to higher demand. LOCATION, LOCATION
It is important to recognise, however, that the affordability of HMOs and MUBs it is not always a necessity, for some tenants it is a choice. This is because HMOs and MUBs offer the opportunity to live in areas where they may not be able to afford to buy – examples exist up and down the UK, as the sought-after suburbs of cities like Birmingham, Liverpool and Manchester are home to some beautiful Victorian properties, converted to house multiple tenants in homes benefitting from en-suite bathrooms, high-speed broadband and home working spaces. While some argue that the mix and transient nature of tenants who call these types of property home are not conducive to creating communities, it is important to note that by being let, many of these properties are providing homes for multiple people, at a time when we have a clear shortage. The current shortage of stock available to purchase is one of the market’s most prominent characteristics, so I suspect this is having some influence on the types of properties that landlords are buying. Again, looking at Paragon data, 2021 completion figures show that those with HMOs in their portfolios tend to have
greater experience and larger portfolios, indicators of professional landlords. HMOs and MUBs are considered more demanding to manage and are subjected to additional legislation. They also cost more to operate – research shows that landlords with HMOs spend an average of 24% of their income on maintenance, compared with 20% for non-HMOs. SUPERIOR YIELD
With limited supply of what would be considered more ‘standard’ properties – family homes in particular – it may be that we’re seeing more smaller scale investors turning to HMOs and MUBs, traditionally the reserve of more experienced landlords. Despite the increased management cost, properties with the capacity to house multiple tenancies can offer superior yield generation compared to single units – landlords with HMOs typically achieve yields of 7.5%, followed by flats in multi-unit blocks at 7.0%, whereas detached and semidetached properties offer average yields of 6.1%. Housing multiple tenancies also means that HMOs and MUBs benefit from the impact of any void periods being minimised – if one is left empty, the rent paid by the remaining tenants will likely mean that there are no resulting missed mortgage payments. MANAGING RISK
This offers lenders greater security, but this model is not without risk. HMOs and MUBs are generally untested in a high interest rate environment, or in circumstances where properties value dip. In the event of a serious economic downturn, if possession becomes necessary, the purchase price as well as additional time and money required to manage these types of properties means that they could be difficult for lenders to sell on and recoup all of the money lent on the property. This means that for all of the positive aspects of HMOs and MUBs, lenders must carefully assess exposure to these types of properties, ensuring that they have the skills, experience and data to mitigate and manage the risk. M I www.mortgageintroducer.com
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It’s goodbye from me Xxxxxxxxxx Bob Young chief executive officer, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Fleet Mortgages
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s someone who has spent very little time during my working life thinking about retirement, it is somewhat surprising to find that I have actually reached that point, made the decision, told everyone of my plans and am now just weeks away from stepping down from Fleet Mortgages. I’m not sure what it is, but there appear to have been a spate of similar announcements being made over the past six to 12 months, as numerous industry ‘personalities’ – a term which you begin to dislike the older you get, in my experience – have decided to hang up their mortgage ‘boots’.
“I am incredibly proud of what we have achieved here with Fleet and in Fleet” Perhaps that’s not the case at all, Perhaps I have just been more in tune with those who have recently retired because it was more on my mind. Whatever the situation, this – as you will have probably guessed – is my last article for Mortgage Introducer as CEO of Fleet Mortgages, and I have been grateful for the platform it has provided both myself and the business, particularly in our very early days when we were seeking to establish ourselves. In a way, that time – back in 2014 and 2015 – does seem like a very long time ago. A lot, and I mean a lot, of water has flown under the Fleet Mortgages bridge since then, and then have been plenty of ups – and the occasional down – to keep us all on our toes in the intervening period. Would I do it all again? Absolutely. Would I be doing it right now? Well, that’s an entirely different question. www.mortgageintroducer.com
Which is not to say that plenty aren’t embarking on similar ventures. The industry gossip mill suggests at least half a dozen new buy-to-let (BTL) lenders are likely to launch during 2022 alone. I wish them all the luck, but it will not be easy. Back in the middle of the last decade, there were a large number of things in our favour, not least the vast experience our senior management team had in all things buy-to-let, and the fact that the opportunity existed to pull in an excellent team – many of whom had worked with us before. Plus, there was a fair bit less competition as a whole in buy-tolet, far less specialist BTL activity – which we could see would take a far bigger share of this product space – and we were far enough removed from the Credit Crunch for funders to feel confident in the market, and specifically us as a responsible lender which knew its onions. We predicated our business on servicing the needs of the professional and portfolio landlord, who treated buy-to-let as an investment business, were likely to have more complex wants and needs, and would be looking for a lender that fully understood the market they worked within. Whether that was limited company BTL or mortgages for houses in multiple occupation (HMOs) and multi-unit lets, we could cater for that landlord demographic, plus we had the service standards to support the needs of advisers and their clients in providing certainty and turning around those cases as quickly as possible. Those fundamentals remain, and I’m absolutely certain they will remain a driving force for Fleet, regardless of who is in charge, or where we secure our funds from. Both, of course, have now changed. Last year, we were acquired by Starling Bank, a hugely ambitious operation and team which I have no doubt will get the very best out of Fleet. Our funding model might have shifted, but our focus hasn’t, and that’s exactly what Starling bought.
‘If it ain’t broke, don’t fix it’ is doubly apt here, and our excellent performance throughout 2021 and so far into 2022 is indicative of what Starling wanted, and what Fleet is able to deliver. There will be no difference in this, even with a new CEO. This just happens to be Mike Lane, someone I have worked with for longer than I care to remember across two different lenders now, someone who knows this business inside out, someone who has all the experience and skills required to develop Fleet, someone who has a hugely talented team behind him, and who, with the support of Starling, will continue to make big waves in this marketplace. I am incredibly proud of what we have achieved here with Fleet and in Fleet. Phase one of our development and growth is over, and we have done exactly what we said we would do. We are in a very strong position moving into phase two, and it feels like the right time to step away, to enjoy my retirement and to allow others to take it forward. There are far too many to be able thank in the space provided, but I would particularly like to thank all the people I’ve been lucky enough to work with at both Fleet and CHL, as well as the advisers who trusted us, placed their business with us, and I hope came to the conclusion that they made the right decision. Thank you also to the distribution partners who came on board in our very early days – and since – and who understood what we could deliver and promoted us to their advisers. I remain at heart hugely positive about the mortgage market, and the buy-to-let sector specifically, but also about the importance of professional advice. We are a resilient bunch – we have needed to be – but, in my glasshalf-full view, our best days are still ahead of us. I wish every single one of you the very best for the future – it will, as always, be what you make it. M I MARCH 2022 MORTGAGE INTRODUCER
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Working the angles Grant Hendry head of sales, Foundation Home Loans
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MLA’s mortgage market tracker recently highlighted that the typical intermediary now places 103 cases per year, a 32% increase from the yearly average determined in Q4 2020. In terms of the business handled by intermediaries throughout 2021, this was suggested to have remained broadly consistent – with residential mortgages taking up 65% of all cases, while buy-to-let (BTL) took up 27% and specialist lending 8%. This got me thinking. If the ‘typical’ number of 27 BTL cases handled by an intermediary over the course of 2021 were to be replicated in 2022, what type of business might this include, and where might additional opportunities arise? Firstly, it’s prudent to point out that the whole mortgage market will be driven by a different, and changeable, set of dynamics in 2022. Secondly, there is likely to be a shift in the proportion of purchase and remortgage business being written over the next 12 months. Finally, I don’t have access to any further insights into the respondents featured in this tracker or the types of cases being written; however, speaking more generally, we are preparing for growth in specialist lending, and in the more specialist areas of the BTL sector.
It will be interesting to see how these factors are reflected in next year’s figures, but for now, let’s focus on where opportunities are likely to emerge for those intermediaries looking to bolster their buy-to-let business. MAXIMISING THE REMORTGAGE OPPORTUNITIES
The latest Landlord Panel research from BVA BDRC for Q4 2021 outlined that one in three leveraged landlords plan to remortgage over the next 12 months. Of those leveraged landlords who plan to remortgage, over half (55%) are likely to opt for a 5-year fixed-rate mortgage, with 14% saying they will secure a 2-year fix, and 8% a 3-year fixed deal. The proportion of those who expect to purchase by releasing equity from properties within their portfolio increased in quarter four last year, up 8% to 24%, suggesting landlords will continue to tap into any capital gains they have secured as a result of house price increases over the past two years. Encouragingly, 70% of all landlords said they would use an adviser to secure a buy-to-let mortgage on their next purchase, while 67% said the same for an existing mortgage renewal. When combined with current interest rate uncertainty, swap rate volatility and vast numbers of 5-year fixed rates maturing over the course of the year, these figures help demonstrate the vast potential on offer throughout the BTL remortgage market. From a product perspective, we are still operating in a highly competitive lending environment, which continues
to provide landlords with a range of suitable and attractive options. This was highlighted in data from Moneyfacts for January, which showed that there were almost 1,000 more products available than two years previously in January 2020, before the onset of the pandemic. A greater remortgage focus is inevitable across the BTL sector, and for those landlords who are capital raising, lenders will be carefully monitoring how and where this capital is being used. From our perspective, areas which are likely to remain high on landlord’s priority lists in 2022 are limited company lending for greater tax efficiency, and houses in multiple occupation (HMOs) for the highest yields. LIMITED COMPANY LENDING
As outlined in the BVA BDRC research, a growing number (52%) of landlords are utilising the benefits of a limited company vehicle when adding to their portfolios. Those with smaller portfolios continue to be more likely to purchase as an individual, with this being the case for 52% of landlords with one to 10 properties, versus 11% of those with 11-plus properties. Currently, 17% of landlords report that they hold at least one of their properties as part of a company; this increases with portfolio size, as 46% of 20-plus property landlords are reported to hold some or all of their portfolio in a limited company. On average, for those who have a limited company, seven of their properties are held in this way. HMOS
There are many angles for intermediaries looking to bolster their buy-to-let business
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When it comes to yield, HMOs continue to top the charts at 7.5%. Linked to this, students provide the strongest yield of any tenant type at 7.4%. The next highest yield was said to be multi-unit block flats at 7%, with the lowest yield coming from individual flats (5.4%). So, bearing in mind all these factors, how different will your 27 cases look in 2022, compared to 2021? M I www.mortgageintroducer.com
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Forewarned is forearmed Cat Armstrong mortgage club director, Dynamo for Intermediaries
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e operate in a marketplace where many firms collate their own internal data, but we are also consistently presented with a variety of external insights, analysis and reports. These cover a wide variety of areas across many different sectors and there’s always something of interest emerging on an almost daily basis. This is a factor which highlights the diligence and thirst for knowledge throughout the industry, alongside the reach of our excellent trade press. When assessing the performance of the buy-to-let market it sometimes pays to keep it simple, and there is nothing more fundamental to all landlords than average rents and asking prices. So, let’s take a look at some recent data from the two largest property portals operating in the UK to get a sense of which direction average rents and asking prices were heading as we entered 2022. AVERAGE ASKING RENTS
Focusing initially on Rightmove’s Quarterly Rental Trends Tracker for Q4 2021, average asking rents hit annual growth of 9.9%, reaching £1,068 per calendar month outside of London, the highest annual jump on record. Wales (12.7%), the North West (12.5%) and the South West (11%) were at the forefront in annual asking rent growth, while London hit record growth of 10.9%, with asking rents in the capital reaching 3% higher than before the pandemic started. Pontypool in Monmouthshire, Wales saw the largest annual increase in asking rent of any local area, rising 20% from £562 pcm to £674 pcm, followed by Ascot (18.8%), and Littlehampton (17.5%). As outlined throughout this tracker, tenant demand remained high entering www.mortgageintroducer.com
Many variables remain in play for landlords, so preparedeness is key
the new year, meaning the imbalance between supply and demand is set to continue until more choice comes onto the market. This combination has led to Rightmove predicting that average asking rents will rise by a further 5% in 2022. AVERAGE RENTS ACHIEVED
Focusing on rents being achieved, the latest insights based on Zoopla’s Rental Index found that average UK rents rose 3.7% in Q4 2021, taking the annual rate of rental growth across the UK to +8.3%. The average rent for the UK is now said to be £969 pcm, a new high, and £62 pcm higher than at the start of the pandemic. On a regional basis, London leads the way in terms of rental growth, with a 10.3% annual rise. Even so, given the falls in London rents during the pandemic, rents in London are only modestly above where they were at the start of the pandemic. In March 2020, the average London rent was £1,622, and in December 2021 it had risen to £1,640. Rental demand has gathered momentum in city centres over the past six months as the pandemic started to ease. This time last year, Zoopla was reporting the ‘halo effect’ as demand in wider commuter zones rose amid a ‘search for space’, but dipped in city centres amid consecutive lockdowns. Demand now appears to have firmly bounced back in city centres as offices have reopened, students have returned, and the increased ease of global travel has allowed a release of pent-up international demand.
Rents are suggested to have risen in every other region and country in the UK, with growth ranging from 4.8% in Scotland to 10.2 % in Northern Ireland. An analysis of asking rents over recent months suggests that much of the pandemic ‘rental recalibration’ took place during Q4, with an easing in asking rents during January. The change in rents has put upwards pressure on affordability levels in many regions, although they remain close to longer-run averages. Zoopla’s measure of affordability – rent as a proportion of gross income – has averaged 36% for a single earner over the past decade. In December it rose to 37%. For those sharing with one other person, rent accounts for 18% of average income. This raft of data certainly bodes well for landlords and the buy-to-let sector as a whole in the coming year, but – as ever – location will continue to have a huge bearing on rental income and yields being generated from a host of BTL property types. In addition, the quality of tenants – especially those who may be looking to rent for longer – will also impact asking prices and potential rate rises, with many landlords carefully evaluating the benefits of risking losing longerterm tenants for a few extra pounds per month. Many variables remain in play for landlords, and as the old saying goes, forewarned is forearmed when it comes to managing these incomes and outgoings and maximising the yields on their investments over the short, medium and longer terms. M I MARCH 2022 MORTGAGE INTRODUCER
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Holiday lets: The boom is far from over Jean Errington Xxxxxxxxxx business development manager, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Harpenden Building Society
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ith overseas travel restrictions being eased, could the surge in staycation holidays be over, and could we see a dip in demand for UK holiday let accommodation? I don’t think so. I strongly believe there will be ongoing demand from investors wanting holiday let properties, providing a significant opportunity for mortgage brokers in 2022 and beyond. Here is why! CIRCUMSTANCES ARE CHANGING
Despite the likelihood of being able to travel more freely in the year ahead, will people want to head overseas to the same extent as in pre-pandemic times? Having sampled all the UK has to offer over the past two years, holidaying here looks likely to maintain its popularity, to some degree at least. According to research from Parkdean Resorts, 53% of people interviewed indicated they will holiday in the UK in 2022, creating a significant demand for holiday let accommodation. The love of the British staycation remains strong, providing considerable opportunity for investors wanting to capitalise on the popularity of holidaying closer to home. Wouldbe holiday let owners are seeing the favourable returns possible, but need expert support from their broker and lender when financing the purchase. REASONS TO HOLIDAY IN THE UK
Stability – whatever is happening in the wider world, a staycation is less vulnerable to outside influences. With the likelihood of new COVID-19 variants appearing around the world,
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holidaying on home soil provides a strong option. Additionally, the outbreak of war in Ukraine, and heightened international unrest generally, could also throw doubt over some travel plans this year. It’s easy – you know what you’re getting and it’s easy to travel to. There are no flight cancellations, delays in the passport queue, and no currency issues to contend with. The expense – with the cost of fuel hitting an all-time high, airlines will have no option but to pass on the rising cost to their customers. Renewed interest – with overseas travel significantly curtailed, we’ve all learnt to appreciate the great holiday destinations on our doorstep. Mini-breaks – with pent-up demand following years of not being able holiday, a short break here could be a welcome addition to overseas travel. Great options – investors are pouring money into holiday lets, making them as desirable as possible to maximise occupancy and attract customers willing to pay a premium for a high end spec. Standards in holiday accommodation in the UK have never been higher. FINANCING OPTIONS
When choosing a lender for your holiday let customers, it’s important to strike a balance between the lender’s expertise in the market, their product features, and the rates. We manage complex cases, offer bespoke solutions and provide flexible underwriting. Harpenden’s business development managers also have a wealth of knowledge when it comes to holiday lets, and a great track record of securing finance in this specialist area. Here is what we offer, including unique features within the market: 2.69% or 3.19% repayment and interest-only options, plus 75% and 80% loan-to-values (LTVs).
Top-slicing – if rental income doesn’t cover mortgage payments, we can use surplus income. Gifted deposits accepted – must be from a family member. No upper age limit. Customer’s income is considered from a range of sources. Holistic view of the applicant’s financial circumstances. Available for purchase, remortgage or release of equity to include shortterm holiday letting. A minimum income of £30,000 is required Personal usage allowance introduced, up to 90 days. AirBnB is accepted. We lend in town and city centres, which other lenders may not. We lend for properties above commercial units or properties. WHAT ARE HOLIDAY LET OWNERS LOOKING FOR?
We speak to customers, potential customers and their brokers on a regular basis to ensure we are offering what they want. Dan Collins, from Hertfordshire, who has several holiday let properties, told us: “There’s much to consider when buying a holiday let as there are multiple moving parts, none more so than the financing options. You need a broker who can operate effectively in this niche area and link you to the right lender. “In each holiday let purchase I’ve made there has been a need for speed, to move quickly and get the deal done. The broker I use really understands my financial profile, enabling me to secure the chosen property without delay. Like many investors, I have multiple income streams, so I need to be matched to a lender who gets this, who looks into my financial situation in detail and takes into consideration the full picture. In my experience, a specialist lender will do this, and a positive outcome is created. I look for the right deal to meet my needs, not necessarily the cheapest “ Brokers with strong applications will be welcomed by a specialist lender like Harpenden. 2022 is already proving to be a considerable opportunity for new holiday let business, don’t miss out! M I www.mortgageintroducer.com
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Bridging the gap in business volumes Jane Simpson Xxxxxxxxxx managing director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx TBMC
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ith a range of industry indices highlighting how the stock available to buy and let is currently constrained and well below levels needed to meet demand, brokers may be faced with limited business volumes. Despite this, there is still a lot that can be done to help generate business and strengthen lasting relationships with clients that could pay dividends in future. Demand for rented property has been high for a prolonged period, and voids recently reached their lowest point for five years, according to Paragon research. Although landlord overheads will have increased as a result of things like sky-high energy prices and increased maintenance costs, this demand and scarcity of stock is placing pressure on rents which have risen at the fastest rate since 2017, according to Office for National Statistics (ONS) figures published recently. This means that – since recovering from the initial economic shock caused by the pandemic – landlord profits have been fairly well insulated, and the stability of bricks and mortar
A good knowledge of bridging loan options is valuable
www.mortgageintroducer.com
investment remains attractive to many, at a time when other assets can be seen as poor performing or relatively volatile. As a result, there are still many landlords that are interested in expanding their portfolios if the right properties are available. Reports suggest that the scarcity of stock has been seen to the greatest degree in traditional family homes, meaning that investors could be faced with a lack of what would be considered more standard properties. Applications may reflect this, with cases that are more challenging to underwrite. The role of the broker is vital in these scenarios, as they can keep communication flowing, working closely with lenders and borrowers to ensure that as much documentation as is necessary is requested first time around, minimising timescales and frustration. As a result of the current stock shortages and in anticipation of a greater emphasis on the standard of privately rented homes referenced in the recently published Levelling Up White Paper, some landlords are also turning to improving the quality of their existing portfolio or investing in properties that need upgrading. BRIDGING KNOWLEDGE
Whilst on the surface bridging might seem like an expensive option, its value lies in its speed and flexibility
– at a time when competition for property is fierce, bridging loans give buyers the ability to move quickly to acquire stock. In addition, these types of products enable investors to finance properties that first charge lenders might not be willing to lend on, meaning that landlords can also target reduced price property at auction. Bridging loans are also well suited to situations where landlords need to finance property upgrades. Whilst new kitchens and bathrooms can be fairly quick to fit and inexpensive, many first charge lenders may not lend on a property which isn’t in a lettable state on day one. Bridging loans are not subject to the same restrictions, so provided the landlord is only keeping the bridge for a short period of time – three to six months being fairly standard – it can be a cost-effective way to grow a portfolio. Of course, to be economical, the bridge should only be used for as long as it is needed. Brokers need to ensure a suitable exit lender is in place, and landlords should be well organised too. Having a good grasp of the different stages involved, along with pre-agreed timescales, will help to ensure that things run as smoothly as possible and works are carried out quickly, something that may take more planning than usual due to shortages of skilled labour and materials seen in the wake of Brexit and the pandemic. Many bridging companies are now venturing down the first charge buy-tolet route, and can enable the landlord to have a guaranteed exit onto one of their own first charge products, helping to eliminate any concerns over getting off the bridge once works are carried out. Lenders like West One now have a good range of buy-to-let rates and flexible criteria, with the benefit of the bridging proposition sitting behind it. While only covering a small number of scenarios, these examples highlight how – by just talking to clients about their portfolios and business plans – brokers can help to educate landlords about forthcoming changes to regulations or the range of products available to them, providing a good service while potentially creating opportunities for business. M I MARCH 2022 MORTGAGE INTRODUCER
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Advertisement Feature
Property Ambitions in 2022; let’s get them moving. With Tanya Elmaz, Head of Intermediary Sales for the South at Together.
Will 2022 finally be the year your clients get to buy their first home, move, or renovate their property? According to a recent set of surveys commissioned by Together, almost half of the UK population have property ambitions this year, and 91% feel driven to achieve them. But for many Brits, their property dreams – although unshakeable – are feeling more and more out of reach, as they lack knowledge of the financial options available to them. More than 45% of firsttime buyers and 50% of self-employed participants either had doubts they could get a mortgage, or were certain they’d be turned down.
28% of survey
respondents say access to finance is their main barrier.
Featuring new survey results from specialist lender Together*
Many Brits feel like they’re at a standstill, or facing an uphill battle. As a broker, you probably know better than anyone that the clients you meet – self-employed and firsttime buyers in particular – may not always find a suitable mortgage so easily. But both of these groups (96% of first-time buyers and 84% of self-employed) are more likely to have to borrow money to achieve their property ambitions than the population overall (75%). In fact, 28% of those surveyed said access to finance is their main barrier stopping them from achieving their ambitions this year. On average, people think their application will be refused due to four main reasons – their income, lack of deposit, lack of good credit and their age. 28% of survey respondents also said the pandemic has made their ambitions harder to achieve, having a negative effect on their employment and their ability to save or borrow money.
For Professional Intermediary Use Only. *Results gathered from three surveys conducted by OnePoll in December 2021 on behalf of Together. Featuring 2,000 UK participants, 1,000 UK self-employed participants, and 1,000 first-time buyer participants.
Meeting the ever-moving needs of homebuyers in 2022. Many homeowners and homebuyers look very different now to how they did, let’s say, 50 years ago, around the time Together was first established. Changes to how we work, buy property, and manage our credit has resulted in many Brits being overlooked by mainstream lenders. Self-employed workers can often struggle to borrow from high-street banks – their complex, sometimes irregular or multiple income streams may be considered unstable. This is a concern that many of our survey respondents seem to share; 55% of selfemployed think the main reason their mortgage application would be turned down is because of their job status, and 35% say it’s because they don’t have a regular monthly income. When it comes to our first-time buyers, 41% said they’ll be using either the Right to Buy or Shared Ownership scheme to take their first step onto the property ladder – which some lenders may consider a complicated purchase. And of course, anything but a ‘perfect’ credit history could also be enough for a case to be rejected.
Almost a third of self-employed people are completely unaware of the specialist lending options available.
Although the population’s needs are perhaps more complex than they’ve been in the past, many of their ambitions are the same as they’ve always been; the self-employed just want the ‘stability of a place to call home’ and first-time buyers want to escape the limbo of renting and ‘start their lives’ now in a property of their own. But sadly, almost a third of self-employed people and nearly half of first-time buyers are completely unaware of the specialist lending options available which could help them achieve their property dreams. Brokers are trusted and perfectly positioned to give customers the confidence they need to keep moving forward, by connecting them with specialist lenders who are willing to listen and be more flexible when it comes to their circumstances. Here at Together, we pride ourselves on being able to do just that, by working closely with our partners to find the right solution for their clients. The majority of those surveyed (64%) think people should never give up on their ambitions – no matter the challenges or how long it takes to get there. Together, we can show them the way. Let’s get your clients moving.
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Five ways to win industry awards Kevin Carr Xxxxxxxxxx chief executive, Protection
xxxxxxxxxxxxxxxx, Review; MD, Carr Consulting xxxxxxxxxxxxxxxx & Communications
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n the protection and mortgage space it’s always awards season. But how do you win them? Let’s take a look at the basics.
GET OFF TO A GOOD START
BACK IT UP
The most important thing about any award entry is to back up the claims made. Time and again, judges see award entries that talk about great achievements, which are no doubt true(ish), but then they move on to talk about something else without displaying any evidence or stats to prove it.
“Take it seriously and plan ahead – if you can – because getting the stats and evidence needed to back up your claims can often take a bit of time. Stick to the word count and when you’re at the final draft stage, check the entry criteria again to make sure it hasn’t gone too far off-piste.” Just about every company says they put the customer at the heart of the proposition, or that they are a leader in their field, but when it comes to award entries it’s important to back it up. STICK TO THE CRITERIA
Most awards will have clear entry criteria, including word counts,
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deadlines, and guidance on what the judges might be looking for. Take it seriously and plan ahead – if you can – because getting the stats and evidence needed to back up your claims can often take a bit of time. Stick to the word count and when you’re at the final draft stage, check the entry criteria again to make sure it hasn’t gone too far off-piste.
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Write an exciting intro and make your best points first. Judges will often have dozens of entries to read – if not more – and while they all get read, it’s important to impress early on, so don’t leave the best bit until the end. Remember the customer and try not to focus too much on internal developments. Entries that don’t talk about your customer may not do well, and if the entry is about a person – rather than a company – make sure to talk about the person and not so much the employer. BE OUTSTANDING AND HUMBLE
It’s important to shout about successes – but not to brag or criticise competitors. Try not to draw attention to weaknesses, and if you’re going to make something a big part of the entry, make sure it is something that stands out. Catching up with the market, passing exams, and good service is all business as usual, not outstanding. And remember that saying ‘kind of’ or ‘fairly’ unique doesn’t exist – but it happens a lot. FEEDBACK AND ENDORSEMENTS
If it’s close, then a strong testimonial from outside of your own company can be very persuasive. These need to be sourced, with a name and job title if from the industry, or if it’s a customer, provide a surname and region.
NEWS IN BRIEF Holloway Friendly has launched a new income protection plan called My Sick Pay. AIG Life has extended its offer for policyholders struggling under the current economic conditions to reduce their protection insurance premiums. LV= has announced a new life and critical illness policy offering greater affordability and simple cover. British Friendly has relaunched its loyalty programme, Mutual Benefits, with a greater focus on everyday health and wellbeing. Zurich has launched a standalone critical illness plan for customers who do not want a product combined with life insurance.
If you can’t get one person to be nice about you, you probably shouldn’t win. Overall, you might be the best – or certainly one of the best – at what you do, but if that doesn’t come across strongly enough in the written entry the chances are you won’t win. Those who win the most awards tend to be a combination of a great person or company and a great entry. MYTHS
What if we don’t buy a table or sponsorship? Judging is typically done months in advance and before tables are sold, and judges usually have no knowledge or interest in who has or hasn’t bought a table. What if I can’t make the ceremony? As above, judging is typically done months in advance and judges have no idea who can or can’t attend on the night. What if I’m too old, too young, too big or too small? Its not always easy judging young against older or small against big, but none of these win by default. A big company doesn’t win just because it’s the biggest. M I www.mortgageintroducer.com
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A well-needed healthcare solution Mike Allison head of protection, Paradigm Mortgage Services
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s we all know, in a service industry customers are arguably the biggest asset a business possesses. As far back as the 1960s, Ansoff in his book ‘Corporate Strategy’ told us there were only ever four ways to develop new business, via new and existing products in new and existing markets: Pro d u cts NEW
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Of course, there are sometimes many barriers to entry into a market, and levels of expertise that we just cannot hope to achieve at the right time. However, where there is demand within a market, and the expertise and processes are not too far removed from those exhibited in our own, then surely there is a time when you should explore expanding a portfolio of products. One such area that is attracting considerable attention at the moment is healthcare. In terms of demand from consumers, it appears as though the interest in private healthcare has risen steadily over the pandemic. One specialist I spoke to recently said they had moved from producing 8,000 to 9,000 quotes per month prepandemic to 23,000 to 24,000 now. Insurers also tell me that first-time sales among advisers are accounting for significant numbers of their business. www.mortgageintroducer.com
If we look at mortgage advisers, they may feel – given a higher proportion of income may be being derived from product transfers as opposed to purchases and remortgages – that this will hit them in the pocket harder than previously, and therefore they may be looking for new avenues of revenue to fill that gap. Buy why healthcare, and why now? WAITING LISTS
One simple response is NHS waiting lists. Under the NHS Constitution, if your GP refers you for a condition that’s not urgent, you have the right to start treatment led by a consultant within 18 weeks from when you’re referred, unless you want to wait longer, or waiting longer is clinically right for you. In December of 2021, the number of people forced to wait more than 52 weeks to start non-urgent treatment was 310,813, up from 306,996 in the previous month, and 39% higher than in December 2020. A total of 20,065 had waited for more than two years. Overall, 92% of patients left waiting are those meant to be treated within 18 weeks. This means that many people are suffering as a result of the strains put on the NHS during the pandemic, and will continue to do so for some while. In total – according to recent reports – more than six million people were waiting for treatment. You may have also seen recently that that the survival rates for cancer reached 50% for the first time, and we should not forget the considerable cost of ongoing care for cancer patients and the costs they incur as a result. This all comes at a time when pressures are about to increase on personal budgets due to inflation, which is at its highest recorded level in decades, in addition to other price rises due to hit shortly. RISING PRICES
Energy bills – the cost of energy has risen because of the high price
of wholesale gas and of producing electricity at the moment. There is a price cap to limit the amount energy suppliers can charge per unit of gas and electricity. This cap is set to rise by £693 in April. Food prices – food and non-alcoholic drink prices rose by 4.2% in 2021. There is the possibility they will rise further in 2022. National Insurance – anyone earning income in the UK may need to pay National Insurance. This includes employed and self-employed people. The UK government has confirmed that National Insurance will rise in April 2022. Council Tax – many local authorities in England are planning to increase Council Tax payments in 2022 in order to balance their spending during the pandemic. Rail fares and petrol prices – train fares in England, Scotland and Wales are increasing by up to 3.8%. The cost of petrol and diesel have also been impacted by a rising cost in oil prices. PROTECTION PRODUCTS IN A TIME OF CRISIS
These are prime examples as to why we should at least consider critical illness or income protection policies, as well as considering healthcare. If you are involved in investments and your clients decide to use their assets under management to pay for private healthcare, this can also affect adviser earnings. Of course, as with many protectionbased products, you can choose to work with your customers yourselves, or for those who want to pass to a specialist, many support service businesses – including Paradigm – have referral partners to ensure clients continue to get a whole of market service. It may not be a solution for all advisers, but as clients read and hear of the daily issues faced by the NHS, it is certainly one way to support them in delivering a solution in what clearly is a grave, and ongoing, crisis in healthcare. MARCH 2022 MORTGAGE INTRODUCER
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GENERAL INSURANCE
Half a decade at the helm: A CEO’s diary Xxxxxxxxxx Rob Evans CEO, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Paymentshield
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eaching my five year anniversary as CEO of Paymentshield has caused me to reflect a lot recently on how the insurance industry has evolved since 2017. There’s no denying that the volume of change stomached by the sector, particularly in the past 12 months, has been gargantuan. It’s also arguably been predominantly positive. A QUICK RETROSPECTIVE
In 2020, we were somewhat clueless as to the scale and staying power of the pandemic. Innovation took a back seat to maintaining service, which quickly became advisers’ number one concern. Bring on 2021, and with it the stamp duty holiday, feast-to-famine market dynamics and the germs of Financial Conduct Authority (FCA) regulatory change. In other words: opportunity, an end to stagnation, and a vision of what’s to come. Since the onset of the pandemic two years ago, we’ve seen the bottoming out of mortgage approvals transform into a strong house-buying market, propped up in large part by the stamp duty holiday. This has played out at Paymentshield too, with our home insurance sales for first-time buyers and house movers rising by 20% and 19% respectively in 2021. ONLY UP FROM HERE
We are heading in the right direction then, and the optimist in me would say that it’s only up from here. That’s certainly been the case at Paymentshield. Within Q1 of 2022, the company marked a special milestone – one that has been an ambition of mine
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ever since I tried the CEO position on for size. Following a record year of growth in 2021, we are on track to exceed half a million customers in Q1 this year. Reaching 500,000 customers is an achievement that is not only personally meaningful, nor just an important moment in the company’s 30-year history, but also a symptom of an industry on the rebound. Resilient partnerships have been the secret to this success – not slashing prices or sacrificing quality products for those that skimp on cover. We’re also now averaging 10,000 sales a month – nearly double that of 2016 – and continuing to grow our adviser and customer community so we can help more people to protect the things that matter most. I’m not sharing this to simply pat Paymentshield on the back – though I am incredibly proud of the hard work and commitment of our staff to accomplish such milestones. Rather, I believe it’s important to reflect on these things: we’ve come a long way as an industry, and we should remind ourselves of our progress and adaptability. It’s fantastic to see such growth in the intermediary market, as it suggests that consumers are rightly driven by overall value rather than price alone. So then, how do we build on this growth sustainably and enable advisers to do the same?
Yet despite this twofold understanding, the majority of advisers admit to missing key sales opportunities – 51% in 2017, 60% in 2021. It seems that converting, rather than identifying, the GI opportunity is the persistent crux of the issue. Thankfully, 2022 promises several opportunities that should help advisers by facilitating GI conversations. 2022 MARKET OPPORTUNITIES
First up is the FCA Fair Pricing Practice regulation, implemented in January. Paymentshield still firmly believes that intermediaries will be the winners of this reform, as the ban on price walking – and with it the end to the race to the bottom – promises to shift the narrative from price to value. This is already playing out, with sales by comparison sites down year on year. Particularly now, in the face of a cost of living crisis, consumers will desire expert guidance, as it’s more than likely that their financial situations will have changed since their last remortgage or review of their home insurance policy. On this point, 2022 is predicted to be a record year for remortgage, and remortgage promises to give advisers considerable latitude in approaching clients with a GI review. The Intermediary Mortgage Lenders Association (IMLA) forecasts remortgage lending to jump from £82bn to £89bn this year, with high volumes of 5-year fixed-rate mortgages also set to mature. Here, then, is not only clear earnings potential, but also a direct opportunity for advisers to close the gap between GI ‘best practice’ and actual practice that our Adviser Surveys highlighted. In 2022, remortgage will be the springboard for tapping GI’s potential.
APPETITES AND ATTITUDES
Each year, we conduct a survey to track advisers’ sentiments towards general insurance (GI). Half a decade has seen 20% more advisers agree that it’s best practice to discuss GI with clients, rising from 79% to a virtually unbeatable 99.1%. Over the years, there’s also been common acknowledgement among advisers that clients want GI advice: 65% in 2021, on par with 68% in 2017.
FIVE YEARS INTO THE FUTURE
The past five years have asked a lot of the insurance industry. As important as it is to pause and take stock, we also can’t afford to be complacent. We’re better equipped now, as an industry and as individuals, for the kind of market turbulence we’ve experienced in recent times. If we draw on this resilience for the next five years, it’ll be a happy half a decade. M I www.mortgageintroducer.com
Lifetime Mortgage Specialists
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www.pureretirement.co.uk Company registered in England and Wales No. 7240896. Pure Retirement Limited is authorised and regulated by the Financial Conduct Authority. FCA registered number 582621.
REVIEW
GENERAL INSURANCE
Where will advisers of the future come from? Xxxxxxxxxx Geoff Hall xxxxxxxxxxxxxxxx, chairman, xxxxxxxxxxxxxxxx Berkeley Alexander
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ix out of 10 employers stopped all new apprenticeships when COVID-19 took hold, according to the Association of Employment and Learning Providers. However, 2022 looks to be the year when apprenticeships will kickstart once again. The ‘plan for jobs’ slogan has been a key commitment of Rishi Sunak’s tenure as Chancellor. We have seen him launch a raft of initiatives, including the Kickstart and Flexi-job schemes, to reaffirm his belief that apprenticeships help fuel a “high skill, higher productivity economy.” So, whatever your politics, what is your ‘plan for jobs’? Can the star advisers of the future join the industry through apprenticeships? I believe they can. For many years, Berkeley Alexander has benefited from the Modern Apprenticeship Scheme, as a part of our goal to help secure a better
future for young people, whilst at the same time improving the talent pipeline of our business. We’ve had great success with this scheme, employing apprentices on fixed 12-month contracts to work alongside and support our existing teams, providing them with on-the-job training, in conjunction with studying
“If you’re looking to grow your business, don’t overlook apprentices. You might just find yourself a star of the future” for a relevant qualification. In fact, we have two more apprentices joining us this month. The benefits? We give people their first step on the career ladder, provide support, training, and qualifications, and invest in the future of our business and our industry by bringing in grassroots talent. If you’re looking to grow your business, don’t overlook apprentices. You might just find yourself a star of the future – we certainly have, several times over.
Record numbers of first-time buyers need protection According to the Legal & General Mortgage Club, searches for mortgages suitable for first-time buyers (FTBs) rocketed by 64% in 2021. In fact, along with ‘first-time landlord’, it was the third most searched term in 2020, and the fourth most popular in 2021. This could be partly down to the fact that they are now the only group eligible for any kind of stamp duty discount, and that high loan-to-value mortgages are easier to come by. Whatever the reasons, FTBs will all need home insurance, and some will be buying it for the first time. Most FTBs are now over 30, but research shows this generation have not typically been big insurance buyers. Often price-oriented, this generation is comfortable buying online, and could fall into the trap of buying cheap insurance at the cost of quality cover. The value of quality advice has never been more important for FTBs. The key is offering the right policy at the right price; reaching, as default, for the 5-star products with all the bells and whistles isn’t necessarily going to be the best choice. You have the experience to understand each individual FTB’s needs, and make recommendations that provide the protection they need at a price they can afford. M I
An ‘alarming’ legislation change Are you aware that on 1 February new legislation came into force requiring all homes in Scotland to have interlinked smoke and heat detectors in place? For many homeowners and landlords, this could potentially impact the validity of their home insurance. Under the new legislation, every home in Scotland – including landlord buy-to-lets – must now have interlinked fire alarms. Interlinked means that if one goes off, they all do, so homeowners will
always hear an alarm wherever they are in the property. The new law has come about following the Grenfell fire, and it applies to all Scottish homes. If you operate in Scotland or have clients with properties across the border, ensure they’re aware that it’s now their responsibility to meet the new standard, and furthermore that landlords are responsible for installation and meeting the costs. It is worth bearing in mind that compliance will in time form part of
any Home Report when they come to sell their home. Whilst Berkeley Alexander’s insurers have not currently changed their stance, all home and landlord buy-tolet insurance policies differ, and some insurers’ policies could now, or at some stage in the future, contain conditions and exclusions around the failure to comply with relevant legislation. I urge you to check the wordings of relevant client policies, and if in doubt speak to your GI provider for clarity. MI
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www.mortgageintroducer.com
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EQUITY RELEASE
Regulators regulate level approach to consumers and the duty advisers have to them. Xxxxxxxxxx Stuart Wilson CEO, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Air Group
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f there’s one constant in all our working lives, it’s regulation. Or at least a version of it, because as we have all come to realise, regulation is very much a moveable feast. As someone very wise once pointed out, we should expect nothing else; ‘regulators regulate’ as the saying goes, and given the demographic we serve, equity release firms are well aware of the various different regimes and frameworks to take into account. CONSUMER DUTY
The latest – and perhaps one of the most significant since the regulation of our sector – is the Financial Conduct Authority’s (FCA) Consumer Duty reforms. You will no doubt have read an increasing amount about these recently, and it’s not too dramatic to say these are game-changers in terms of what firms will have to implement, what outcomes they need to achieve, how they will document compliance, and the cost in terms of money and resources in order to get up to the requisite standards. The irony, however – as was recently pointed out during a ‘Breakfast with Stuart’ meeting of later life stakeholders – is that despite the length of that latest document, a little more clarity wouldn’t go amiss. Currently, the Consumer Duty starts with a consumer principle, namely: “A firm must act to deliver good outcomes for retail clients,” and moves to crosscutting rules around firms acting in good faith, avoiding foreseeable harm, and enabling and supporting them to reach their financial objectives. It looks for outcomes in four areas: products and services; price and value; consumer understanding; and consumer support. Now, few would argue with much of that, certainly not in terms of a highwww.mortgageintroducer.com
ASKING FOR CLARITY
At this point we might normally sound the oft-used warning of ‘the devil’s in the detail’. When it comes to the Consumer Duty, there is a vagueness that might present problems for firms across a number of areas. First up, while the duty isn’t supposed to cover retrospective advice that has already been provided, or business written, there is a need to clarify what is expected around the treatment of a firm’s back book. For those who have been transacting business for many years, this is likely to be a key concern, and one they would like to work into their planning as soon as possible.
“We’re all acutely aware that the FCA has been concerned about advisory fees and charges for some time. Reading between the lines, the Consumer Duty could be seen as something of a Trojan Horse to tease out more transparency and justification for the fees and charges advisers make” In addition to this, we also know that firms will have to get their heads around the expectations of these new rules – for example, what will they deem ‘fair value’ in terms of their fees and charges structure? I think we’re all acutely aware that the FCA has been concerned about advisory fees and charges for some time. Reading between the lines, the Consumer Duty could be seen as something of a Trojan Horse to tease out more transparency and justification for the fees and charges advisers make. For example, what is the methodology
used to justify your fees and charges? It’s highly unlikely that an arbitrary fee structure is going to be acceptable, so firms will need to get their ducks in a row on this. Firms are also going to be required to produce an annual assessment that they are meeting all the requirements of the Consumer Duty, and will need to be able to share this should it be asked for. Of course, none of this comes cheap. The figures quoted by the FCA for initial – and then ongoing – implementation are eye-watering to say the least, and the regulator may actually be underestimating the real cost. Finally, what about the timescale for implementation? The consultation period ended mid-February for the latest Consumer Duty paper, and it’s anticipated there will be another one in July this year, and then the entire industry is being asked to implement this by the end of April 2023. To say that is tight would be a huge understatement, and depending on the final rules, this could impact firms’ capacity to transact ongoing business. So, we should all be asking the FCA to rethink its implementation timetable, because currently this time period is way too tight. SUPPORT AND RESOURCES
If that all seems a lot to contend with, then I have great sympathy with that view. However, appointed representative firms should have their networks all over this, as they will need to drive implementation for member firms, while directly authorised firms should find plenty of support and resource. The Air Academy will have a number of modules, particularly on the outcomes required and the way firms can record their ongoing compliance. We will support advisers throughout the process, but the first step is to take a deep dive into the Consumer Duty as currently constructed, and to think about how your systems, processes and mentality might have to change to deliver on it. M I MARCH 2022 MORTGAGE INTRODUCER
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EQUITY RELEASE
Keep ‘em coming! Andrea Rozario Xxxxxxxxxx chief corporate officer, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Bower
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odern equity release is something I am very proud of. I have called this industry home for quite a long time now, and to watch it grow, evolve and improve has been a tremendous experience. From my days at the industry trade body – then Safe Home Income Plans (SHIP), now the Equity Release Council (ERC) – to the past decade at Bower, the industry has become a real contender and is now punching above its weight more than ever, something I always knew it would be capable of. But what is the biggest hallmark of this success? What about customer numbers? Yes, in 2022 equity release is helping thousands up and down the country recognise the retirement they deserve. But it’s not that for me. Product choice? Well, equity release plans today are incredibly diverse and varied, but it’s not that either. What about market size? Today’s equity release completions smash through £1bn in business in just three months, whereas it took the market a whole year to hit that mark not so long ago. But again, this is obviously something to
celebrate, but it’s not what I think truly signifies a successful industry. No, for me the true sign of a strong and successful industry will always be customer protection. Perhaps this is a throwback to my days at SHIP, but watching the ERC continue to fight to create a safe and solid market for our growing customer base has been a joy. For an industry that still needs to shed some of its less than ideal past, customer safety and protection needs to be at the bedrock of everything we do. CONSUMER STANDARD
So, it was yet another step forward on the road of equity release progress when the council announced the most recent consumer standard – the guarantee for all new customers to be able to make partial repayments. This new standard is the fifth official ERC-backed safeguard to have been launched since 1991. It follows: fixed or capped interest rates for life; the right for customers to remain in their homes for life, until they pass away or move into long-term care, with no obligation to make ongoing repayments; the No Negative Equity Guarantee; and the right to move their loans to a suitable property when moving home, subject to criteria. This new standard – which will launch toward the end of March this year – will secure all customers
Today, those looking into equity release have more protection and flexibility than ever before
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yet another level of flexibility and protection. Any and all new customers taking out a lifetime mortgage that meets the ERC standards will be guaranteed the right to make partial repayments and – this is the key bit – will face no penalties for doing so. A GREAT LEAP FORWARD
This new standard will of course give our customers the ability to reduce their borrowing, but will also allow them to offset the interest. This new addition to the standards will, I believe, go a long way in turning the heads of equity release detractors, who almost always point to interest rates and comparisons with the traditional residential market – no matter how disingenuous these comparisons might be. But that’s a story for another day. For me, this announcement is a great leap forward for our industry. Not since the No Negative Equity Guarantee will a council-backed safeguard have had such an impact on our customers. Today, those looking into equity release have more protection and flexibility than ever before – the true sign of a strong and stable industry. What’s more, this proliferation of choice and variety truly mirrors the modern equity release customer base. In 2022, the lifetime mortgage is helping people from age 55 and much older and the industry has evolved to help all sorts of new customers – both young and not so young – which again is a sign of an industry going in the right direction. Ultimately, every new standard that is launched by the ERC and backed by lenders solidifies equity release. Five is a start, but more protection is the way to go. I would love to see the frequency of these safeguards and consumer standards increase – why not get to 10 total before the next decade? After all, the safer customers feel, the more will look to the lifetime mortgage as a viable option, and then everyone wins. M I www.mortgageintroducer.com
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REASSURING EVERY REMORTGAGE CLIENT
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Focusing on insurance might not be top of your client’s priority list when arranging a remortgage. However, by offering to look into their current arrangements and find the right insurance for their needs, you can provide reassurance their home and everything in it is properly protected.
paymentshieldadvisers.co.uk/reassure For intermediary use only. Paymentshield and the Shield logo are registered trademarks of Paymentshield Limited. Authorised and regulated by the Financial Conduct Authority. © Paymentshield Limited 02/22 02241
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EQUITY RELEASE
Keeping up with equity release Alice Watson head of marketing and communications, Canada Life
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he home finance landscape has seen significant evolution. Customers have greater choice than ever before, and with the market currently going through a period of low rates and wider accessibility, home finance and lifetime mortgages are becoming a real option for many, perhaps for the first time. The Equity Release Council (ERC) found that the number of products had more than doubled since 2018 alone, and this proliferation has brought much greater flexibility. For example, some providers allow clients to waive
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early repayment charges if they repay because they’ve downsized. Others allow annual repayments to be made without a fee, offering the option to reduce the impact of interest roll-up or even reduce the outstanding balance. These developments, along with competitive pricing and house price growth, has made equity release an increasingly valid option. When we consider the financial pressures people have been under for the past two years, it is essential that advisers and homeowners understand these evolving features and benefits. Canada Life research has found some new emerging customer demographics: complex families and late financial bloomers. These are characterised by more complicated family units, getting on the housing ladder later, and choosing to marry later, if at all.
All this, at the same time as generous final salary pension schemes are steadily declining, will have a significant an impact on these groups’ ability to accumulate wealth, and the time they have to save for retirement. Canada Life welcomes innovative measures to reach them, such as opening up our market-leading WeCare service, which provides access to virtual GP appointments and mental health support, as well as help to quit smoking, get fit or seek a second medical opinion. It even extends to offering legal and financial support. This has now been made available to all our customers, and we hope it will help during this difficult time. People will continue to look for ways to bolster their retirement lifestyles, and it is up to providers and advisers to understand how to cater for them. M I
www.mortgageintroducer.com
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CONVEYANCING
Listen to fresh voices to improve industry GETTING INDUSTRY INSIGHT RIGHT
Karen Rodrigues Xxxxxxxxxx sales director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx eConveyancer
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f brokers were hoping for a quiet start to 2022, then they were in for a rude awakening. From the conversations I’ve had with brokers, business is as busy as ever, with significant numbers of clients approaching them in the hope of moving to a home that better meets their needs this year. I WANT TO MOVE, I JUST DON’T LIKE DOING IT
The activity levels of the past couple of years have been extraordinary, and while some have been quick to point the finger at the encouraging impact of the stamp duty holiday, the reality is rather different. While that particular tax perk obviously encouraged plenty of people to push forward with a move, even months after it finished interest remains high. Rightmove, for example, has just reported its busiest every January, with buyer demand not only up by 16% on last January, but by 24% on January 2020, before COVID-19 even reached our shores. Encouragingly, this has also been accompanied by a rise in listings, with the number of potential sellers contacting estate agents for valuations up by 27% on last year. There is a clear message there – normal people want to get on with moving house. This is all the more notable given how many of them know that they will not enjoy the process itself, with buying and selling a home still pinpointed as one of the most stressful events you ever go through. Surely we can find ways to improve the process? www.mortgageintroducer.com
Unfortunately, the prospects of making progress in improving the way our industry operates is all too often held back by the way that the authorities engage with us. It seems like whenever the government holds a consultation with the property industry, it only ever speaks with the exact same trade bodies and organisations as previous industry studies. Progress is always going to be difficult if the authorities only ever speak to the same old names, so it’s not hugely surprising that they are lacking when it comes to fresh ideas. In some cases, this is deliberate. There are some who are only too happy
“If the government invited disruptors around the table, and picked the brains of businesses, then we could see real progress” for the property market to continue in its current state, as they benefit from it. For others, the lack of fresh ideas isn’t intentional, it’s simply that they cannot see beyond the status quo. Yet this blinkered approach does everyone a disservice. Those of us working in the industry end up getting ever more frustrated by a plodding process which has failed to move with the times, while our customers continue to find the prospect of a home move daunting because they know it will take a mystifyingly long time. CLADDING CRISIS
We can also see how damaging this approach is in practice. Look at the farcical and long-winded way that the government has addressed the cladding issue afflicting high rise buildings.
For years now we have known that high rise buildings across the country still have this dangerous cladding in place, yet actually tackling that problem has taken far too long. Last year we had the government announcing that some of these costs would have to be borne by the leaseholders – a situation that was always difficult to justify – only for this idea to be pulled recently. The cladding furore has also left thousands of property owners unable to switch mortgage deals due to questions over the potential presence of cladding, leaving them unable to move house or even remortgage, trapping them on potentially costly deals with no real end in sight. It’s not only a deeply troubling state of affairs, it was also avoidable. IT DOESN’T HAVE TO BE LIKE THIS
As they currently work, industry consultations are usually little more than a missed opportunity. Yet they do not have to be. If the government invited disruptors around the table, and picked the brains of those businesses which are trying to do things differently in order to deliver a better experience, then we could see real progress. We pride ourselves on being forwardthinking at eConveyancer, having embraced new ways of supporting brokers, conveyancers and clients on property deals. Investing in our DigitalMove platform, which brings all of the stakeholders together, is a perfect example – it improves communication, reduces the chances of brokers having to take calls from stressed and under informed clients, and helps cases complete far quicker. That sort of innovation comes from speaking to brokers, getting to grips with how things can work better, and then taking decisive action. If the government took a similar approach with the industry as a whole, speaking to a broader base of people and then acting on their feedback, then we could see tangible and lasting improvements for everyone involved. M I MARCH 2022 MORTGAGE INTRODUCER
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CONVEYANCING
An end-to-end advice process Xxxxxxxxxx Mark Snape managing director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx Broker Conveyancing
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he much-anticipated Levelling Up White Paper was finally published last month, and needless to say there was a significant amount of detail focused on the housing market, and in particular how the government intends to increase the number of first-time buyers in every region of England by the end of the decade. This will probably come as little shock to our industry. We know the government has been keen on upping first-time buyer numbers for some time, hence why we have had various schemes focused on this, and why it looks more than likely that we will have more in the future, even if Help to Buy is due to end next year. This ongoing commitment doesn’t appear likely to change, and while the Levelling Up Paper did contain an inordinate amount of waffle, there were some clear threads for the industry to pull on, particularly when it comes to first-time buyers. For instance, there was mention of how the government might prioritise local first-time buyers and the means by which it might do this. One can’t believe that it won’t be throwing its weight and money behind further schemes designed to open up the market for first-timers, and rather importantly, secure more affordable homes for them to buy. That becomes doubly important in a house price environment which currently sees house price inflation up by over 10% year-on-year, and while we can’t anticipate this level being sustained, we do know that the average deposit required is going up, as is the
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average age of a first-time buyer, and more and more require parental support of one kind or another. Of course, much of that ability to turn ‘Generation Rent’ into ‘Generation Owner-Occupier’ will rely on the supply-side issues that still clearly need to be resolved. Indeed, part of the reason 2021 saw more than 400,000 first-timers get onto the ladder was because the pandemic induced a large number of existing homeowners to put their homes up for sale, and those homes were able to be bought by those moving from the private rental sector (PRS) into owner-occupation.
“‘New blood’ is absolutely vital, in the housing market as a whole, but also to individual advisers and their businesses” It will clearly need some joined-up thinking, then – as evidenced by the Levelling Up paper – and there are a number of proposals about how we get much-needed supply into the market. For example, the white paper talks of regeneration projects in certain English towns and cities, a £1.5bn Levelling Up Home Building Fund to provide loans to small to medium (SME) builders and developers so there is less reliance on the big house builders, plus a renewed commitment to build more affordable homes, via an £11.5bn Affordable Homes Programme. The commitment to get to 300,000 new homes every year by the mid2020s remains, and while that would clearly make a huge difference, we are perhaps all mindful of the fact that new home numbers have only very rarely got to 200,000, let alone 100,000 more. However, when it comes to firsttimers, there are some good foundations
to work upon and, as mentioned, 2021 was a much stronger year for this buyer demographic. Plus, other data shows a decent level of demand maintaining itself into 2022. Twenty7Tec recently said there was an 84% monthly increase in first-timers searching for mortgages in January, and it will not need me to tell the advisory profession the benefits that can be secured for firms that prioritise first-time buyers and – hopefully – turn them into long-term clients. That ‘new blood’ is absolutely vital, in the housing market as a whole, but also to individual advisers and their businesses, because it doesn’t just deliver one-off, transactional mortgage business – again hopefully – every few years, but starts the relationship off on the right foot and it should provide income time and again by servicing any number of needs. At the outset, for example, while consumers are increasingly savvy, I have met few first-time buyers who completely understand the full financial requirements of purchasing, and the financial product requirements, plus other services, that they are going to need to buy a home. How many first-time buyers have you advised who know exactly which conveyancer they are going to use to act on their behalf? Perhaps only in new-build, where pressure is often brought to bear on buyers to use the developer’s own solicitor, is there anything like this. Instead, the vast majority are not just coming to you for your mortgage product knowledge and advice, but are also looking for a steer right through the transaction, in terms of insurance and protection, conveyancing and legals. If 2022 and beyond is indeed going to be a favourable environment for firsttime buyers, buoyed by a continued government commitment to help them onto the property ladder, then advisers need to be ready and prepared to access these clients, to provide them with all the required services, and to ensure that they keep them on the books for the entire length of their homeownership journey. They will want and need that help; it’s up to you to provide it. M I www.mortgageintroducer.com
REVIEW
AML
AML is not an afterthought Xxxxxxxxxx Neal Jannels managing director, xxxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx One Mortgage System
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am a big fan of Ozark. If you haven’t seen it, don’t worry I won’t be posting spoilers, but the storyline begins with a financial adviser dragging his family from Chicago to the Missouri Ozarks, where he must launder $500m in five years to appease a drug boss. It’s safe to say that this comes with its fair share of issues and, hopefully, is not based on a true story. FINANCIAL CRIME
Nevertheless, financial crime is certainly on the rise. Cryptojacking attacks – in which cybercriminals covertly hijack computers to mine and steal cryptocurrencies – soared by 564% in the UK last year. According to a report from cybersecurity company SonicWall, there were 436,000 UK cryptojacking attacks in 2021, compared to 66,000 instances in 2020. When it comes to money laundering, the UK is second only to the US in terms of the amount of money laundered each year. In the US, an estimated £216.5bn is laundered annually. The UK comes in second with £88bn, while France (£54.5bn), Germany (£51.3bn) and Canada (£25.6bn) also rank among the top five
Financial crime is on the rise
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countries in terms of value of money laundered. The figures, from identity verification software maker Credas Technologies, put together using OECD data, also revealed that about £1.8trn is laundered globally each year, some 3% of total GDP. This is a real issue, and a serious global problem which affects companies of all shapes and sizes across financial services. In October, NatWest Bank admitted that operational failures, including weaknesses in automated monitoring systems, meant that it failed to prevent the money laundering of £400m. It pleaded guilty at Westminster Magistrates’ Court to failing to comply with anti-money laundering (AML) regulations between 2012 and 2016. FINANCIAL SANCTIONS
There are many other high profile examples of banks across the world breaching money laundering rules, and the tech battle continues when it comes to identifying suspicious activity in a bid to combat these ever-evolving threats. In the UK, Financial Conduct Authority (FCA) regulations mean finance firms must have adequate AML systems and controls in place. Most, if not all, financial advisers understand this requirement, but what some firms don’t realise is the need to ensure that clients are not on the Financial Sanctions list. Whilst checking sanctions status can be done by visiting the HM Treasury website, this can be an onerous process.
As such, here at OMS, we recently formed a partnership with Sanctions Search to provide users with a simpler option to make these checks, in addition to arming them with the ability to verify client identities, provide results on any bankruptcies or insolvencies, examine the voters roll, validate passports and driving licences, and integrate several other checks, all aimed at highlighting any potential issues for advisers when dealing with their clients. INFORMATION IS KING
Generating information accurately and effectively as early in the application process as possible really is the holy grail for advisers. Being able to access such information can help advisers successfully package a case upfront, rather than potentially having to deal with a string of enquiries from lenders down the line. This is especially relevant when it comes to the type of complex cases which are becoming all the more common in the current lending environment. Streamlining this journey can also free up valuable time to allow advisers to do what they do best – generate business, provide advice and maintain close relationships with their clients. Information is king, and ensuring that robust money laundering controls are in place remains vital for intermediary firms, but this shouldn’t be viewed as an afterthought or a nuisance. Having such measures in situ helps safeguard the business and its clients. In addition, if combined with an innovative tech solution, it can help collect and collate client information up front to really help speed up the mortgage journey. When taking into account the types of financial crimes outlined, technology can sometimes appear to be a doubleedged sword. However, it’s important that intermediary firms don’t ignore it, as when used correctly, its positives continue to far outweigh the negatives. M I MARCH 2022 MORTGAGE INTRODUCER
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THE OUTLAW
THE MONTH THAT WAS
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The Outlaw says farewell in his final column for Mortgage Introducer
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t’s clearly something to do with not being very tall, isn’t it? Napoleon, Lewis Hamilton, Jose Mourinho, Rosa Klebb, Eddie Jones, Sid from Toy Story, Dennis Wise, Scrappy Doo and now Putin. All that anger and self-promotion. But we simply haven’t got the space here to go all Freudian on this centuriesold human neurosis, not least because sadly this is the Outlaw’s last article for a while, whilst I take a writing sabbatical and watch a continent hopefully avoid imploding. The Ukraine narrative is of course ubiquitous right now, and I’ll finish this piece with some daft predictions – and in places some overdue castigations – for some of this truly appalling story’s associated pundits and their soundbites. Some days now I purposefully won’t even watch any TV news. It can be truly dispiriting, can’t it? On such days, the UK mortgage market thankfully offers a tiny modicum of respite. For example, there was the announcement last week that application levels are now higher than what they were in pre-pandemic times. In a similar and slightly eerie fashion, I am already hearing of anecdotal evidence that world events are encouraging more and more folk to move out of our large cities. We’ve gone Armageddon paranoid, haven’t we? Resultingly, agents such as Knight Frank and Savills will certainly now have a bumper year, as Putin’s cowardly and corrupt cronies are induced into selling their ill-gotten London and Surrey mansions. Though this is nowhere near fast enough, thanks to our tacky Conservative government, which has condoned these shady practices for far too long – see below regarding Boris’ own inward-hurtling molotov cocktail, spiced with scandal and impropriety. Back to our world, and we’ll remain on the subject of gratuitous gains. What a difference a year makes. 12 months ago, the high street lenders were staring at a Bank of England (BoE) missive to get ready for negative
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interest rates! Today we see mortgage products being priced upwards daily – widening the lenders’ $pread$ – and those worries over provisions for bad debts have largely evaporated. Amid this El Dorado for them, the Big Four have posted combined profits of £34bn, and all were at lengths last month to stress the versatility and tenacity of the UK mortgage market and – begrudgingly in places – brokers at large. And yet procuration fees remain wholly out of proportion with what the broker now does in the name of delivering these assets, packaged and pre-screened. To which certain lenders glibly reply: “Ahhh, but property inflation has seen your average loans increase dramatically!” You just couldn’t make it up, and by the time the Outlaw rides again, precisely nothing will have changed. GOODBYE FOR NOW AND THANK YOU, READERS
Much like Aiden Turner in Poldark, “I will return.” That’s about the only comparison, I know, ladies! These monthly columns have been cathartic to pen, and the wildly various responses I’ve had from readers over the years – both endorsing and reprimanding – have been a joy. If you dish it out, you have to take it, too. Yet far too much that occurs on this planet is taken far too seriously. In all truth, much of the Outlaw’s own opprobrium is delivered with tongue firmly in cheek – in so far as today’s Woke Police even permit any satire or irony ever being transcribed without upsetting somebody. After five years – and with the UK mortgage market now a backwater story I’m afraid – it’s wholly sanguine and with some pathos that I’ll now sign off with some questions and observations on the biggest story that has occurred across 60 penned articles for this super publication: the distressing state of affairs in Ukraine, where thankfully, a far braver man than me – and a genuine ex-comedian, no less – is trying to keep spirits high. →
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THE MONTH THAT WAS 1. Why did successive Labour and Tory governments permit consumers to become so reliant on both China and Russia for goods and services? Let’s now totally reset who we trade with and find a moral compass, whatever the cost. Peace is worth paying for. 2. Will Boris and the Tories ultimately pay the price for their rampant coziness with the kleptocrats who funded them? That story is coming to get you Boris. Your outrageous luck will run dry. 3. Regardless of the debates around vaccine sign-offs and Brexit, will Germany, France and the EU ever be able to make quick and decisive decisions? Their shameful three weeks of dallying back in February, before the invasion, meant that Ukrainian citizens are far less armed today than they could have been. 4. Is there a bigger moron in the UK than John Terry? Captain, leader, legend...idiot, and now a pariah coach. Found guilty by the FA of racism, and now celebrating the ‘achievements’ of Roman Abramovich, who like so many other sycophants of the genocidal Vladimir Putin, simply came to this country to legitimise his ill-gotten wealth. 5. Whilst on the subject of Chelski FC, congratulations to their pond-life fans at the Burnley match who sang over a minute’s applause for murdered Ukrainian women and children. We surely all know Chelsea fans who are genuinely articulate and intelligent. So I pity them having to put up with these illiterate chavs every week .... 6. Does a canny politician ever waste a good crisis? Our COVID-partying PM appears to be off the hook for now – anyone remember a woman called Sue Gray? Macron showboats with twohour telephone calls to Putin – surprise, surprise, he has an election upcoming – and Sleepy Joe Biden has awoken to the possibility of resuscitating the lowest
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approval ratings in US presidential history as Trump gets set to run again. Furthermore, Germany’s new chancellor Olaf Scholz is thankfully now permitting the passage of arms to the east as the world recalls that his Brusselsloving predecessor Angela Merkel was the one who grossly over-appeased Putin after the Soviet break-up, and got Germany hooked on Russain gas. In summary, most populations sadly do get the governments they deserve. The Yanks did with Trump, we did with Boris, and the Russians did with Putin. But this psychopath can’t actually win in Ukraine. I am 100% on that. A country that large, and with its indomitable spirit, will spawn 300,000 guerrilla resistance fighters in no time. The hope is that the ‘silver bullet’ solution which we now all need is actually the one which is fired from one of Caesar’s senators. et tu Sergei... And it’s ironically The Ides Of March this week… My prediction is that within another two months we’ll be at a stalemate. Putin’s overcomplacent blitzkreig will be in pieces and he’ll receive his fate from within. At worst, we may see a resolution where Ukraine is sadly split in half, with street terrorism the status quo. My abiding disdain is not for Putin, but for the Russian people. Aside from the 5,000 brave demonstrators already locked up, this population of the surly and the rude have allowed this to happen. The sanctions against Russia will hurt many innocents, but after two decades now of Russians flashing their bling in Dubai, Marbella and London, the ever-tightening economic measures are probably the only way this nation can wake up and finally see that their murderous little emperor never had any clothes on to begin with. Glory to Ukraine, and see you again. I hope to God. M I www.mortgageintroducer.com
PANEL
LATER LIFE
A MARKET REACHING MATURITY Jessica Bird recaps the recent Later Life panel discussion, which looked at how the equity release market is entering a new and exciting phase in its evolution
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he Equity Release Council (ERC) found that total lending in this market reached £4.8bn in 2021, up 24% year-on-year and surpassing previous records. Meanwhile, Moneyfacts reports that there are 665 products to choose from as of March 2022, a shocking uplift from 96 in 2017. This is clearly a market on the rise, but it still faces considerable misconceptions, and there is plenty more scope for development as it evolves. Mortgage Introducer brought together experts from Key LaterLife Finance, Hampden & Co, Standard Life Home Finance, The UK Adviser Group, more2life, Age Partnership and AIR Group to discuss the next steps for this market. BOUNCE BACK AND MOVE FORWARD This market had a strong year in 2021, and Will Hale, CEO of Key LaterLife Finance, predicts that there is a similarly positive picture ahead: “I’m delighted to say it feels like a very buoyant start to 2022. Certainly, we’re seeing fairly high levels of demand.” Paul Glynn, director of sales at more2life, agrees that 2022 looks set to be another strong year: “From a manufacturer perspective, we definitely saw a buildup Key Partnerships strip ad 180x29.pdf 1 09/03/2022 of momentum at the back end of last year. It was
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probably the busiest run into Christmas I’ve known in this market – the whole market was active right to the wire, and it’s come off the blocks really quickly at the start of this year. It’s definitely buoyant, and we’ve got every reason to be positive.” Hale suggests a few factors that have been influencing this, some of which are continuing from 2021. For example, borrowers are looking to help younger family members fund house purchases, or by providing early inheritances. He adds: “Interestingly, we’re also seeing a bounce back from the more traditional equity release customers, those who are looking to borrow for discretionary reasons. The government is removing most of the COVID-19 restrictions, so people’s confidence levels are returning around holidays and plans for home improvements – aspirational retirement living.” Hale says that this pent-up demand will combine with the financial pressures that are continuing postpandemic in order to fuel greater demand this year. Added to this is the fact that the UK is facing a cost of living squeeze that is likely to hit pensioners in particular. “We’re seeing people want to ensure that their retirement income allows them to do the basics of heating and eating, and looking at housing equity to
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“We’re genuinely now seeing the market progress to one that is delivering to a whole range of different customer profiles and needs. It’s really encouraging to see” WILL HALE support that,” Hale adds. “We’re genuinely now seeing the market progress to one that is delivering to a whole range of different customer profiles and needs. It’s really encouraging to see that.” Duncan Buchanan, banking director at Hampden & Co, which focuses on retirement interest-only (RIO) products, also recognises a change based on long-term cost of living trends. He says: “What we’re seeing is that younger clients – so the family of people who are looking for retirement products – are finding it tougher to move. House prices have gone up far more than their pay, utilities have gone up, so there’s actually more of a requirement for the parents to help them. “Their parents are sat in properties with huge amounts of equity, so the family driver will be enhanced through the next year, as the younger elements of the family start to struggle in certain areas.” One factor which is stimulating demand in the shortterm is the prospect of rising rates. Moneyfacts found that rates for lifetime mortgages have already risen since the start of 2022, up to 4.33% compared with a record low in March 2021 of 3.86%. Matt Stirland, head of equity release at Age Partnership, says: “Certainly through the start of the year, we are seeing customers acting quicker and making decisions now. “There’s people looking in their crystal balls and thinking rates are going to continue to rise. So, better do it sooner rather than later. There’s certainly been some urgency in the first couple of months.” He adds: “Linked to that, conditions are very good for those customers that have already got equity release plans and are looking to refinance and remortgage, so we’re seeing a really strong performance in that area of the market, where we’re refinancing and saving Key Partnerships strip ad 180x29.pdf 1 09/03/2022 customers tens of thousands of pounds in some cases.”
Maxim Cohen, founder and CEO of The UK Adviser Group, says: “Rising interest rates, the desire to help out children, grandchildren or even great-grandchildren, and the ongoing need to downsize, are all likely to play a role in driving the market in 2022.” CHANGING DEMOGRAPHICS Tied in with this growing demand, the later life market is starting to see shifts in its customer demographics, which suggest a new phase in its evolution. For Stuart Wilson, CEO of AIR Group, this is partly down to a change in perception. He says: “What we have started to see is that stigma of borrowing in retirement has now dissipated into our rearview mirrors. Consumers are a lot more comfortable. That traditional image of paying off all your borrowing before 65 and whittling your remaining years away quietly has gone, and people are now actively looking at living, on average, a 20year lifestyle in retirement. Borrowing is an essential part of that.” Cohen adds: “Unfortunately, there is still a lot of misinformation about equity release, and this is a barrier for a lot of clients – even if the product can put them in a better financial position. As more information is becoming more easily accessible, the later life lending sector is starting to see some more traction.” This includes a fundamental shift in the perspective of advisers, who are starting to see retirement lending as part of a wider set of financial planning tools. “All of those factors, plus all the demographic drivers, are aligning into a potentially ever-increasing market, not only in borrowing amounts but in sheer numbers of new customers,” Wilson adds. Buchanan agrees that, from the perspective of RIOs, the “brand of borrowing in later life has completely changed,” which has had an effect on the customer base it appeals to. →
“Five years ago it would have been hard for a high net worth financial planner to try and sell the idea of borrowing in retirement as a solution” DUNCAN BUCHANAN 11:31
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LATER LIFE He explains: “In the past it would have been considered something for somebody who had badly financially planned or maybe needed it to supplement their pension – it’s just not seen like that at all anymore. “That’s opened it up to really good quality clients, but it also means that we’re working hand in hand with wealth managers, which wouldn’t have been the case five years ago. It would have been hard for a high net worth financial planner to try and sell the idea of borrowing in retirement as a solution.” Now, later life lending has become part of Inheritance Tax (IHT) planning and passing wealth onto the next generation, as well as living a better life in retirement. Kay Westgarth, head of sales at Standard Life Home Finance, which relatively recently expanded into this market, adds that the sector opening up to more high net worth customers has also had an impact on the average size of advance. For Hale, the main takeaway is that it is no longer possible to mark out a stereotype for this kind of lending. He says: “Going back five or 10 years, we would all have been able to articulate very clearly what a typical equity release or later life lending customer looked like. Nowadays, you can’t pigeonhole these customers – the market is now serving a very broad range. Generally, for everyone over the age of 55, I believe there’s a later life lending solution out there to suit their particular needs.” This is reflected in the flexibility of the product set, Westgarth notes: “As a new lender, we’ve had a really positive start in the market, and it probably echoes what experienced lenders and manufacturers out there are seeing in that we have flexibility. There’s the appetite for rates, but the flexibility and some of the new products have been really well received, not just for their rates.” Hale agrees that some lifetime mortgages are starting to look and feel like traditional mortgages in how flexible
“From our own launch in the market, that’s been the biggest thing that’s come out both from consumers and advisers – having a brand that they can really resonate with” KAY WESTGARTH they are, the different scenarios they can cater for, and the “superb value” they are able to offer. Linking back to Stirland’s point about customers who are looking to remortgage, Hale says that this is the sign of a market “reaching some sort of level of maturity,” and that this is a good opportunity to reengage with existing customers to offer them new solutions. He adds: “There are now lots of customers we can revisit, either to help reduce the costs of borrowing over the lifetime of their loan, or to help them raise additional monies, or indeed help them benefit from some of the new flexibilities that more modern products have made available. It’s really a sign of the later life lending market coming of age now, and stepping up to meet the needs, of what it what is, as we all know, a growing cohort of the population.” Wilson agrees that the next year or so will likely see a proliferation of new products and flexible approaches, in order to align with the varied demographics and demands among its customers.
“Education and the correct information being made available will help with this culture shift to a mainstream product” MAXIM COHEN Key Partnerships strip ad 180x29.pdf
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NO ONE SIZE FOR CONSUMER OUTCOMES While much progress has been made, there is still a need for further education as a new wave of brokers look to enter this growth market. Stirland says: “Even within the specialists, we’re having to specialise to compete and deliver great customer outcomes. Within our own model, we’re looking to segment and have certain advisers specialise with certain types of customer. The ‘one size fits all’ approach doesn’t work as well as it used to.” Wilson says: “It’s not just mortgage brokers moving across into this product area driven by necessity, we’re seeing the wealth management market really waking up to the opportunities. There is a huge need for training and better alignment of standards. We’re seeing a
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LATER LIFE huge amount of work being done by organisations like the ERC, but the advice community does need to drive forward constantly. We cannot afford to hesitate.” Wilson adds that this is a market that, for obvious reasons, needs to be particularly focused and forward thinking around consumer outcomes, not least because of increased scrutiny from the regulator. “There is still work to be done, and as a sector we’re very good at driving our own training needs forward,” he continues. “The big specialist firms have always been, for many years, very good at that level of standard training. But there are huge variations across the sector.” As the market grows and becomes more complex, advisers need to be wary of becoming “dabblers” – which is more a question of attitude than volume. An adviser might only do a small number of later life cases a year, but still needs to be on the ball in terms of their industry knowledge and standards. Wilson says: “Look at all products, not just equity release, not just RIOs, but all of the potential borrowing solutions – or non-borrowing solutions – for those customers’ needs, and make sure that the record keeping is absolutely spot on.” Cohen adds: “Later life lending should no longer be seen as a last resort – there are real benefits and advantages, which need to be explained in a clear and concise fashion. There is huge potential for this market, given the UK’s ageing population and the fact that many people are living a lot longer.” Buchanan says it is not just advisers that need a greater understanding of the complexities of this market, and that there should be education throughout the chain. For example, a trusted family solicitor might not have the most up to date perspective, or understand how much equity release products have evolved. Hale adds that there is also an education piece to be carried out among consumers. While awareness of this market is growing, there is space for the big banks and insurance firms to step in and promote the sector “in a positive way that gives consumers confidence.” More2life’s research recently found that 74% of customers would welcome more support from their advisers in areas that they were struggling to understand around equity release plans. The entrance of brands like Standard Life Home Finance and Scottish Widows is one step in keeping these products front of mind for consumers, according to Stirland, who agrees that the next phase is to “start Key Partnerships strip ad 180x29.pdf 1 09/03/2022 raising the profile of the product.”
He adds: “We do need the bigger brands and the people who’ve got much deeper pockets when it comes to marketing than we might have, all doing our bit to broaden the appeal to a much wider audience.” Westgarth agrees: “I know from our own launch in the market, that’s been the biggest thing that’s come out both from consumers and advisers – having a brand that they can really resonate with, especially perhaps that 55-plus demographic.” PROTECTING THE VULNERABLE As the profile of this market grows, so does its duty to protect those it caters for. This market’s understanding of vulnerability is constantly evolving, but one of the biggest challenges faced in recent years has been the shift to remote advice during the pandemic. “Advisers definitely want to do the best they can for their customers, but doing it virtually is obviously a bit
“As the number of customer types grows, the number of types of adviser that are getting involved is increasing as well… there’s a broad spectrum of skill sets in and around the market” PAUL GLYNN
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of a challenge,” says Glynn. The pandemic also brought about new pockets of potential vulnerability, such as job losses or periods of furlough affecting borrowers or their families. “We’ve seen the growth in gifting, some of which was driven by the older generation wanting to help the younger generation during a time when their finances are being squeezed, due to COVID-related reasons,” Hale continues. “That’s something we’ve got to be careful of, because whilst in many situations it may be appropriate, as an adviser you’ve got to make the customer aware of the potential increased risk around their own security. “Those are things that advisers are very familiar with dealing with, but COVID-19 has certainly increased the regularity, and heightened the need for advisers to be very sensitive about hand-holding customers.” →
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“We’re looking to segment the adviser and have certain advisers specialise with certain types of customer. The ‘one size fits all’ approach doesn’t work as well as it used to” MATT STIRLAND Glynn adds: “Advisers have been looking for more education, training and support on dealing with vulnerable customers. That’s something we’re passionate about – we will support advisors in any way we can in raising awareness on vulnerability.” While the move to remote advice may have caused some complications, it also created a route to advice, support and finance for customers that might otherwise have been cut off. The market should consider the benefits of an increasingly tech-enabled approach, such as using voice recognition software to spot red flags. Wilson explains: “With the ongoing use of technology, there’s been a huge evolution, and there’s some sterling work being done.” Buchanan agrees that there are two sides to the tech story, noting that moving to remote advice has allowed for more frequent contact with clients, which can be crucial in forming a relationship and spotting potential vulnerabilities. REFLECTING REALITY The different cohorts of customers being brought in is also being reflected in the adviser market. Hale says: “There’s definitely a need for advisers in this market to reflect more closely the customer base we’re serving. Again, it goes back to the point that there is now sort of no identikit profile of an equity release or later life lending customer. The market is here to serve all of the population, all of their needs, and we need that diversity reflected in in our advice space.” Westgarth says that diversity goes hand in hand with educating a wider range of people about the uses of later life lending, and that the market is already making some progress: “One of the things that was really refreshing for me recently was being at a later life lending event, and seeing the growth by way of female presence. I do think as a market we’re very much reaching out and becoming more diverse.” In addition to bringing in more female advisers, Hale notes that this means encouraging those with “experience and focus” from the wealth management or mainstream mortgage markets to branch out. He calls for a drive towards more ethnic diversity, as well as older individuals. He says: “It’s a market that does lend itself well to experienced advisers, and can provide a home for a
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lot of those who want to continue to operate in the market into their into their later years as well.” Most importantly, the effort to create a more diverse adviser base is about looking at the issue holistically, rather than homing in on one element, and this starts with showing the market to be an attractive prospect. Age Partnership recruited heavily through the second half of 2021, with more than 40 additional advisers. Stirland says: “The people that we brought through into our training academy are showing great promise. They’ve got good solid backgrounds in the mortgage market and they’re grasping the products and the advice processes. So, we’re in a pretty good place in terms of attracting talent in this sector. We’re progressing, but we need to do more to diversify the adviser base to be more reflective of the customer base.” For The UK Adviser Group, which is running a major recruitment drive in 2022, Cohen says it is about creating a clear message across numerous channels about the “potential career highs” of being an adviser, as well as the support systems in place, in order to ensure the role of adviser comes across as rewarding. THE FUTURE OF THE MARKET One of the key trends as this market moves into its next phase is the shift from ‘equity release’ to ‘later life’, to better reflect the complex and wide-reaching reality of the products available, while also potentially moving away from negative misconceptions. Cohen explains: “For a lot of the people exploring later life lending options, ‘equity release’ is a dirty word – unfortunately the past products, pre-financial crisis, were sold by brokers who did not have the customer’s best interest at heart. “The products now are very different, but clients do not trust them. We need to educate, and bring the level of advisers up, so the trust is there in the products from the wider industry. Education and the correct information being made available will help with this culture shift to a mainstream product.” Glynn says this includes thinking about “promoting the journey for the client,” and perhaps necessitates a move away from focusing on products, specifically. Instead, this market is shifting into a new norm in which advice is the product, and responsible, flexible lending the end result. M I
“What we have started to see is that stigma of borrowing in retirement has now dissipated into our rearview mirrors. Consumers are a lot more comfortable” STUART WILSON www.mortgageintroducer.com
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LOAN INTRODUCER
SPOTLIGHT
A peppering of seconds Loan Introducer chats to Caroline Mirakian, sales director of second charge mortgages at Pepper Money, about its recent integration with second charge lender Optimum Credit, and what its plans are for this market going forward What made Pepper Money want to offer second charges?
At Pepper Money, we use financial inclusion as the guiding principle for our business. This means that we focus on providing lending products that enable people to meet their objectives to as wide a group of customers as possible, and capital raising is such an important planning tool for so many people. For most, our homes are by far our biggest asset, and being able to tap into the capital in those homes is a popular way for people to achieve key milestones, such as home improvements, consolidating and clearing their debts, and paying for large lifetime items of expenditure such as weddings or university. When it comes to capital raising, many brokers will immediately think of a remortgage or perhaps a further advance, but a second charge mortgage can provide the most suitable and most cost-effective option for many customers. By failing to consider a second charge mortgage for their customers who want to raise capital using their home, brokers are not only failing their clients, they are also failing to fulfil their regulatory duty. So, we wanted to be able to offer brokers the opportunity to access second charge mortgage products. Does the second charge market have the potential to grow? I don’t just think the second charge mortgage market has the potential to grow, I know it has the potential to grow. It is such a flexible product and could benefit so many people.
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The main problem we have at the moment is that there are still many advisers who don’t engage with the market, for whatever reason. If we can encourage more brokers to embrace the second charge mortgage market, recognise how it could benefit their customers and start recommending second charge mortgages, then this sector has the potential to grow much, much larger. You’ve retired the Optimum brand, what other changes have you made? So, currently it remains the same proposition that made Optimum Credit one of the leading providers in the market. However, as part of the Pepper Money proposition, we have plans to invest significantly in developing our offering, continuing to evolve our products, service and technology to meet the changing requirements of brokers and their customers. What are some of the biggest challenges facing the second charge market? The main challenge is actually one of changing habits. We continue to find ourselves in a position where many brokers still do not engage with the second charge mortgage market, and for no good reason. Even if brokers do not have the specific sector expertise, there are many good options for them to work alongside a specialist distributor or even refer the case, but many are not even considering this sector as an option. We need to start changing behaviours, and we need to start raising the profile and understanding of how second charge mortgage lending could help clients. www.mortgageintroducer.com
SECOND OPINION
What innovations do you see coming to the market in the coming years? I think the most impactful innovation will be one of attitudes and behaviour, as more brokers begin to engage with the market and more customers start to realise its benefits. It’s this that will really stimulate the growth of second charge lending. There will also be proposition and technology developments, of course. I think the increased use of automated valuation models (AVMs), for example is one area of change, and we are not the only lender that is investing in enhancing its technology, service proposition and products. So, it promises to be an exciting time for the second charge mortgage market. M I
Norton Home Loans helps Right-to-Buy customers with real life backgrounds. 100% of discount price plus fees available RTB with historic adverse credit Any construction type Flats considered Simon Mules
director, Applicants not oncommercial Section Optimum Credit 125 can be added
Caroline Mirakian
Making it personal If you could invite three people, living or dead, to a dinner party, who would it be? Steve Jobs Bob Marley Lady Gaga Do you have any hobbies or interests? Hiking, canyoning and travel – I would love to see every country in the world.
Tired of tick boxes? Come work with us. 01709 441926 Marie Grundy
sales director, www.nortonhomeloans.co.uk West One Loans
What music are you listening to at the moment? Oh don’t, I am corny. I love a bit of Ed Sheeran, anything ‘90s related – hip hop and some RNB. What is the best bit of advice you have ever been given? Visualise your success and make it happen.
www.mortgageintroducer.com
THIS INFORMATION IS FOR INTERMEDIARIES ONLY AND SHOULD NOT BE DISTRIBUTED TO POTENTIAL BORROWERS.
MARCH 2022 MORTGAGE INTRODUCER
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SECOND CHARGE
The first steps in the tech journey Matt Meecham chief digital officer, Evolution Money
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e’re all acutely aware of the benefits that technology has brought the mortgage advice and lending industry. There are plenty more to come, and this is coupled with a real emphasis from this government on how we can improve the digitisation of the house purchase process to cut down on aborted transactions and deliver a much speedier journey through to completion. That, however, is slightly ‘big picture’, and we may all need to start looking far closer to home in terms of what we can do to digitally transform and innovate within our own businesses. I know that we at Evolution Money are – in fact, that’s exactly why I was brought into the business – and it has been instructive to look at the way we work and what we can achieve. To that end, and even though our journey as a lender will be slightly different to yours as advisers, I thought it would be helpful to talk through how I’ve approached this job, and the strategy we’ve adopted, as well as identifying some potential quick wins. FIRST STEPS
I spent my first six months in the role learning and understanding the current infrastructure to help me develop a roadmap for the short, medium and long-term digital transformation of the business. So, it’s about taking those first steps. Firstly, the why? This is all about identifying the business needs and goals, including the strengths and weaknesses; a tip for you is that I often spend more time focusing on the strengths once the weaknesses have been addressed. Secondly, and this might not be relevant for smaller firms, but we’ve needed to prepare the board – and
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the wider team – for a culture shift in terms of digitisation. Fortunately for me, we have investors, a board and senior leadership team that are all very supportive and enthused by the thought of digital transformation, and believe in the benefits it can bring. Thirdly, what are the quick wins that could be achieved upfront? As mentioned digital transformation is a journey, not one singular event; you have to constantly evolve for whatever the customer wants next. In that sense, the first project was going to be crucial, as it sets the stage for future initiatives. We decided the best step forward would be a revamp of our online digital journey. STREAMLINING THE JOURNEY
How could we improve this? Could it be better for the customer? Could it improve the journey for our advisers and introducers? Most importantly, what problem are we solving here? Having owned and run a mortgage brokerage myself, I had a fairly good idea of what was needed and how I could integrate technology into the journey in order to streamline it. Not only for the customer and making the lives of our mortgage advisers easier, but for our introducers, Hotkey, digital and packager brokers. So, in January this year we launched that new journey, and as expected, the early signs are that the time from a case application being received to the time it is funded has reduced by almost 50%. That, coupled with efficiency gains in the operation for our advisers – who now have access to a precompleted factfind with Open Banking data which supports our income and expenditure assessment – and digital identification and verification all being done beforehand, now helps them focus on ‘know your customer’ activity and offering advice. In short, our advisers can now help twice the amount of people in the same amount of time. I’m sure this will resonate with all advisers – letting technology take on elements of the
administrative process leaves you with more time to spend on clients and frees up time to advise more clients. Other projects supporting our digital journey include being involved in the launch of new competitive products, improving and sharing management information with our partners, onboarding new partners, launching a new contact centre strategy, and so on. All this has stemmed from identifying where we could improve and how technology could support us. As mentioned, this is not a one and done event, so what might you do after that? Well, over the course of the next six to 18 months – or indeed whatever timescale you set on this – you might want to map out your future and build your vision. For us, it comprises ways in which we can utilise Open Banking even further, to make even better credit risk decisions and be able to look back at that data in the future to analyse those decisions. Improving our performance even further by implementing artificial intelligence (AI) and machine learning, embedding the power of analytics into that analysis through smarter data aggregation and categorisation, will help us on our way to achieve true digital acceleration. Now again, this might not be suitable for all firms, but there will be variations on a theme here that can be utilised. For instance, we want to seek out more partners and introducers, and integrate them into our technology to deliver better customer outcomes and grow our current relationships. All firms can do this. Plus, you can gather feedback from your stakeholders on how you might refine your processes, ready to scale and further transform them. People often refer to riding the crest of a wave. To use a bike analogy, I’d like to think we are at the bottom of a revolution, and my aim is that by digitally accelerating the business I’m adding more peddle power to the process. There’s no doubting that you can do the same. M I www.mortgageintroducer.com
LOAN INTRODUCER
SECOND CHARGE
Too much hype over fintech Tony Marshall MD, Equifinance
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utomation, technology and fintech are all buzzwords that are floating around the lending market. For many brokers working at the customer coalface, what lenders describe themselves and their service as is irrelevant to the daily need to get cases from enquiry to completion in the shortest possible time. For some lenders, having the latest catchword, like ‘fintech’, added to the company website description, while genuinely meant, could also be seen as a way of making it come across as more cutting edge than it really is, with no discernible difference to the offering. It could be because it genuinely improves the customer journey, perhaps as a beacon to attract inward investment from funding sources, or in reality because it sounds modern and
cutting edge in its marketing material. As in many aspects of how the industry perceives itself and the image it projects to its customers and likely investors, much of this is smoke and mirrors. One accepted definition of fintech is that it ‘describes new tech that seeks to
Brokers don’t want buzzwords
improve and automate the delivery and use of financial services.’ I must admit to a healthy dose of doubt on a number of levels. For example, what set of standards does a fintech powered business have to meet to use the title? Can anyone with, say, a new – to them – customer relationship management (CRM) system start calling itself fintech enabled? Is this just the hottest buzzword that means little in real terms but lends a certain tech-savvy gloss to any business that needs to polish its credentials as a mover and shaker? It seems to me that any business can describe itself as a fintech – the word acting as a magic pill that, at a stroke, turns ordinary companies into seeming world-beaters. However, in our sector, are brokers actually that impressed with the claims, and does it influence them enough to do business with lenders who claim this mystical status? My contention is that if you cut down to the bones of what brokers really want from their lenders, it is not the promise of tomorrow, it is the delivery of first-class service today, tech-powered or not. Brokers don’t want to be regaled with marketing buzzwords; they just want to know they can trust the lender they choose to get the job done.
A (short-lived?) 2022 phenomenon
I
was asked recently whether we were seeing more brokers turning to a second charge solution to cover the funding gap, where remortgage requests were coming up short because of tighter affordability tests. The answer is yes, those enquiries are growing, particularly from those cases where people have had credit issues in the period between taking out their original mortgage and the request to capital raise. However, I think the question also reveals something more fundamental. Remortgages are still sadly the default port of call for brokers looking to capital raise for their clients. The fact that there are now funding gaps to fill
www.mortgageintroducer.com
suggests to me that the question clients should be asking their advisers is why they are doing a remortgage at all, if they are having to top up the shortfall with a second charge loan? Obviously, circumstances vary from case to case, but I can’t help but wonder how many, where the customer is saddled with the cost of having two new mortgages, are viable. A second charge mortgage sitting behind the original first charge would do the job just as well, is definitely simpler and probably cheaper for the customer. However, I am encouraged that mortgage brokers are beginning to see how they can utilise a second charge, which is progress in itself. From there, I
am hopeful that they will recognise that a remortgage does not provide all of the answers all of the time, and that second charge mortgages can play an equally important role in their own right. M I
“The fact that there are now funding gaps to fill suggests to me that the question clients should be asking their advisers is why they are doing a remortgage at all, if they are having to top up the shortfall with a second charge loan” MARCH 2022 MORTGAGE INTRODUCER
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DEVELOPMENT
A lender’s perspective on co-living Roxana MohammadianMolina chief strategy officer, Blend Network
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ver the past few years, we have seen an explosion in the trend known as coliving, born out of the desire for the kind of targeted communality aimed at a new generation of Millennial professionals and entrepreneurs who need to travel for career reasons and need flexible accommodation that will allow them to settle in quickly and focus on the job in hand. However, while demand has continued to grow, lenders have often struggled to get their head around funding the development of new coliving spaces. Co-living is not a new property asset class, it has been around well before we all started talking about it in these terms, in the form of houses in multiple occupation (HMOs). According to a government report, there were around 497,000 HMOs in England and Wales at the end of March 2018. The financial and social characteristics of
HMOs are appealing, and these trends are driving the demand for co-living. As a development finance lender, Blend Network often gets asked about what lenders really think about co-living. The reality is that the view varies widely. Some, Blend included, are embracing co-living as the professionalisation of the HMO sector, often cheaper than other private rental options and sometimes used to house vulnerable tenants. In other words, we see co-living homes as elevated HMOs. Others remain skeptical about the trend, and the demand for shared accommodation, particularly after the pandemic. In truth, lenders face a limited upside for getting co-living right, yet a considerable potential downside if we get it wrong, and there are few other real estate asset classes which are now considered as being quite so ‘alternative’ from a lending perspective. KEY HURDLES
From a lender’s perspective, there are a few hurdles we need to get through when trying to finance co-living spaces, planning being probably the most important challenge of them all.
Lenders have often struggled to get their head around funding the development of co-living spaces
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Planning of co-living can be confusing. Schemes may be brought forward as sui generis, C1 hotel use, C3 residential under PD, or large C4 HMOs. Navigating this planning maze presents several underwriting challenges, and is something not many lenders will get comfortable with. Another major challenge is the question of alternative uses. What if it doesn’t work out? What are the alternative uses? Student accommodation or hotels are potential alternative uses, but there is no precedent, and change of use might involve an application to amend the Section 106. Those are challenges development finance lenders will have to overcome when financing co-living spaces. But then there are other sets of challenges faced by long-term lenders, such as mortgage lenders. These hurdles are centred around the lack of specialist ‘institutional quality’ management expertise – companies with a track record and experience in the co-living segment of the market – to be able to reassure lenders. GETTING COMFORTABLE
At Blend Network, we have funded co-living schemes across the UK, and it is something that we can get comfortable with, provided that the numbers stack up. For example, we recently agreed a £2,600,000 loan to transform a portfolio of 10 properties in Gloucester into high-quality co-living spaces targeted at professional tenants in the area. The way we will get comfortable with a co-living scheme – and in fact with any scheme – has a lot to do with the quality of the borrower. Another important point is the source of our capital, which allows us to be flexible if we get comfortable with the deal. Being backed by family offices means that we have more flexibility and room for manoeuvre when it comes to funding a deal. By the way, that is also a reason many lenders find it challenging to finance co-living spaces: because they have tight lending criteria and are constrained by their source of capital. M I www.mortgageintroducer.com
CO
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SPECIALIST FINANCE INTRODUCER
SPOTLIGHT
Putting in the work Jessica Bird sits down with Jamie Jolly, managing director of SoMo, to discuss the lender’s Valuation Only™ product, and how it reflects an evolving market
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ridging lender SoMo has been providing ‘valuation only’ loans for eight years, primarily focused on borrowers with impaired credit, in need of flexible exits, or with non-traditional loan purposes. Lending against the value of the property, not the borrower’s profile, Val Only has quickly become one of SoMo’s hero products, ideal for those who have the means but find themselves excluded from other lenders’ criteria. While this product has historically been a popular choice in the adverse credit arena, SoMo has seen an intriguing increase in borrowers that fit standard criteria turning to Valuation Only, too. This is one of the factors that has led to a 30% increase in SoMo’s client base, according to managing director Jamie Jolly, who adds that this product is part and parcel of the lender’s approach to addressing the needs of the market in real time. He says: “We always strive to reflect a changing market, shaping our products and service around the wants and needs of our brokers and borrowers – we keep our ear to the ground and tune in to what’s going on. And we’re nimble with it. We can react to change in the market quickly, something which we know other lenders can be slow to do.” Jolly adds: “Valuation Only has been very much the lifeblood of SoMo – it’s was one of the key products that we launched into the space with, and over the years we’ve made it famous. “In that time we’ve educated ourselves as well; for instance, we assumed that Val Only would allow us to capture business from within the adverse space, but naturally over time, we’ve received more vanilla type business, where the credit profile is perfect, the asset spot on – a case that would normally fit our Low
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Jamie Jolly
www.mortgageintroducer.com
SPECIALIST FINANCE INTRODUCER
SPOTLIGHT
“We always strive to reflect a changing market, shaping our products and service around the wants and needs of our brokers and borrowers – we keep our ear to the ground and tune in to what’s going on. And we’re nimble with it. We can react to change in the market quickly, something which we know other lenders can be slow to do”
Rate product – but the borrower has ultimately gone with Val Only for all sorts of reasons, some which, in hindsight, make perfect sense and others which are a little more surprising.” Jolly notes that Valuation Only saves borrowers from jumping through hoops – and personal ones at that – and leaves the bulk of the legwork with the lender, allowing for a smoother and more user-friendly process. He adds: “We do a lot of the additional work that we’d normally ask of the broker or customer. We’ll still do our homework and make sure that the decision and the money that we’re going to provide is a sound decision, for us and for the customer and the introducer but it’s far more fuss-free than other loan products.” SoMo has found that the hassle free element works well for high net worth – and particularly international – clients, who might have trouble getting hold of a credit report under the necessary timescales, for example. CASE STUDY
Credit impaired W
hen Mr and Mrs M required £255,000 as working capital for 12 months, they wanted to secure it against their main residence, but both had recent County Court Judgements (CCJs) against them and were unable to provide a workable exit route. Other providers turned down the business for these reasons, but SoMo was able to offer its popular Valuation Only product and provide the couple with a loan to pay not only the working capital, but also their CCJs. The couple was delighted that the deal was completed quickly and efficiently, alleviating the financial pressures on them.
www.mortgageintroducer.com
CASE STUDY
Clean credit S
oMo has been providing Valuation Only loans for eight years to a core audience of borrowers with credit impaired cases, flexible exits, and nontraditional loan purposes, but is now working with more and more with borrowers that fit the standard lending criteria. Some of these include two Hong Kong-based directors, who required captial to renovate a commercial property to let out in Manchester city centre, but found themselves unable to provide any kind of credit report that would help them secure a more traditional loan. SoMo’s solution was to put a ‘process agent’ in place in the UK, who could quickly deal with any issues post-completion. This enabled SoMo to lend the full amount requested to the directors, to their deadline, in what turned out to be seamless, no-fuss transaction. The property is currently undergoing a full renovation.
CORNERING THE MARKET In an increasingly complex and competitive housing market, bridging itself is coming to the fore as a legitimate and more mainstream source of finance. Add to this the ability to “remove all the hurdles, trim back the processes, and utilise a transparent offering,” as Jolly says, and it is perhaps little wonder that the product has taken off among such a diverse group of borrowers. Having a streamlined process, however, does not mean saying ‘yes’ sight unseen. Far from it – to mitigate risk, Jolly says it comes down to being willing to put in the work behind the scenes, and to always keep a finger on the pulse of the market. While Valuation Only has been a staple at SoMo for years, the fact is that it is only becoming more important as the market looks down the barrel of a challenging and complex year. Jolly says: “It’s quite a straightforward product, but it’s quite a broad product in terms of the demographic of the borrower, the asset that you can secure against, the term of the loan, and the loan amount. “So it feels simple and straightforward, but behind the scenes it does some heavy lifting in the number of opportunities it covers.” He concludes: “The product is strong enough and flexible enough to allow us to move forward with the ever-changing landscape of financial services, and the changing borrower profile. We’re so confident we’re cornering the val only market, we’ve even trademarked the product name! ” M I MARCH 2022 MORTGAGE INTRODUCER
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FIBA
Education for the industry Adam Tyler executive chairman, FIBA
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s someone who has been involved in education within the commercial finance sector for many years, the changes in regulation and outward perception seem to be moving us in only one direction. Back in 2014 when Financial Conduct Authority (FCA) regulation moved into our sector through consumer credit, there was a real resistance, but this is now part of our everyday life. The same could be said across all financial services, and this article is written by someone who has seen and experienced all the changes since we had our first regulator. There has been some movement over the years to bring in a programme, or exam even, for the bridging sector. Once upon a time we had the Certificate in Commercial Mortgages,
Education: Setting a standard for all in the industry
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MARCH 2022
a module within CeMap. There have been some good opportunities to expand the knowledge of those in the sector and to guide those new to the industry. With that forementioned advent of FCA regulation, this again was an opportunity to bring about an educational environment, and we did come close to achieving that goal. When we look back 20 years, the commercial finance market was the domain purely of the commercial finance broker. The whole commercial market has grown hugely, and is measured in hundreds of billions of pounds, and has become far more mainstream and of course very professional. But the real change is the individuals working in the sector. Over the past few years, I have overseen a membership in the specialist property finance sector that doubled in 2020, and then grew again by another 50% in 2021, driven in some part by residential mortgage brokers and independent financial advisers (IFAs) expanding their remit into the sector. One of the huge advantages is that, whilst they do not bring experience,
they bring education, qualifications and a different level of regulation. Experience in other sectors does not always translate easily into new areas, and the same can be said of qualifications. However, dealing with customers in property-related finance using fully regulated techniques – even in the specialist finance sector – is welcomed by the lender community, who in turn are more than happy to advise, assist, recommend and of course nurture these new lead providers. Are we, then, forming a virtuous circle combining those who have the qualifications and those who have the knowledge? This is already very well demonstrated where we have experienced brokers providing the same service already for a share of any fee or commission. The divergence of brokerages on all sides of the divide has become more accelerated in recent years, and the main beneficiary has to be the customer. Previously, it may have been difficult for an adviser to recognise a customer’s needs in a sector outside their specialist area. The implication has always been that the customer may miss an opportunity to find the funding they need, as their own knowledge of the wide range of lenders across the UK has always been limited. Therefore, education of a wider adviser market can only be a good thing for all, if they can combine their newly gained knowledge with their own experience. But what about addressing the fundamental question of how this fits in with our growing market of advisers and a number of new entrants? This comes full circle back to education, a standard programme across the industry for all to follow – whether you are new as a broker, an adviser new to the sector, a new employee at a funder, or someone experienced on both sides advising and lending. If we implement an educational programme now, there will be a set standard for all. It may not be compulsory at the outset, but it starts a journey of combining experience and qualifications for the bridging sector. M I www.mortgageintroducer.com
Buy to let
How we could help
your buy to let clients They say that change is the only constant in life, and that’s certainly been true of the buy to let market in recent years. To show you how our criteria could help you meet your buy to let clients’ changing needs, consider the following three scenarios.
And remember, we see criteria as the start of a conversation so if you’ve got a case that doesn’t quite fit, our empowered BDMs are here to help. Contact yours today to see why we’re the home of
andcrafted
The first-time landlord
You’re approached by a client with no previous buy to let experience who’s keen to explore the potential offered by an HMO property. The client has struggled to find a product on the high street and has asked for your help. Fortunately, we’ll accept HMO applications from first-time landlords for properties with up to six bedrooms.
Note: We also offer loans with just a 15% deposit to help aspiring landlords get on the buy to let ladder.
The portfolio landlord
A client with a large portfolio of properties contacts you as they want to purchase another buy to let property but can’t secure a further mortgage with their existing lender. Fortunately we don’t set a limit on the number or value of properties mortgaged with us.
Note: What’s more, we don’t set limits on the size or value of existing portfolios held with other lenders.
The
limited company landlord
A client who runs their buy to let business as a limited company calls to say they need to finance the purchase of a new rental property. They intend to use a loan from another of their companies, but are unable to find a lender comfortable with accepting the intercompany loan. Fortunately we accept intercompany loans, as well as shareholder deposits and director loans.
Note: We’ll also accept newly formed SPVs and LLPs, and we don’t apply specific SIC code requirements.
Adrian Moloney Group Intermediary Director
Call us today on 01634 888260 or visit krfi.co.uk to find your BDM. FOR INTERMEDIARIES ONLY
Information correct at time of print (04.03.22)
a
Residential
How we could help
your residential clients With property prices at near record levels, many potential homebuyers could be finding it difficult to get the residential mortgage they need due to their circumstances falling outside of mainstream lenders’ criteria. To show you how our criteria could help, take a look at these three scenarios.
The
If you’ve got a residential case that doesn’t quite fit, our empowered BDMs are happy to hear from you. Contact yours today to see why we’re the home of
andcrafted
high net worth client
A high net worth client gets in contact to ask about securing a residential mortgage for a £2.5 million property they’d like to buy in London. The client has annual net earnings of more than £300,000, but due to the complex nature of their income they’re unable to find a high street lender who can meet their requirements.
Note: We’re experienced at dealing with clients such as these and have the ability to consider cases in need of high loans and high LTVs.
The self-employed client
A client who works for themselves gets in touch to ask how they can secure a residential mortgage. They’re struggling to find a mortgage as many lenders will only consider applicants who’ve been trading for two years.
Note: We’ll consider those who’ve been trading for a minimum of 12 months and can provide the most recent three months of personal and business bank statements.
The entrepreneur
An entrepreneur who wants to purchase a large newly constructed detached family house on an exclusive development approaches you for help with securing a mortgage. Although their income is straightforward, complexities with previous HMRC bills means many high street lenders won’t consider them.
Note: We’re able to take salary and dividends into account and can offer no maximum loan size on selected products and LTVs up to 90%.
Adrian Moloney Group Intermediary Director
Call us today on 01634 888260 or visit krfi.co.uk to find your BDM. FOR INTERMEDIARIES ONLY
Information correct at time of print (04.03.22)