Remortgage completions fall 31 per cent in February but pipeline inches up

Remortgage completions fall 31 per cent in February but pipeline inches up

Last month saw a decline of 13% in new instructions but a month-on-month increase of 4% in pipeline cases, according to the LMS Monthly Mortgage Snapshot .

The average remortgage loan amount fell by 5% to £204,045 while the average length of the previous mortgage was just over 70 months.

Nine out of twelve regions across the UK have witnessed decreases in their average remortgage amounts, which LMS says suggests a trend towards stabilisation and recovery in the mortgage industry leading into quarter two.

More than 40 per cent of borrowers chose to increase their mortgage balance while 22 per cent reduced their loan size.

Just less than 30 per cent said their remortgage goal was to lower their monthly payment.

Two-year fixed rates were the most popular product, taken up by 47 per cent of remortgaging borrowers in February.

Chief executive Nick Chadbourne said: “The market may appear to be volatile in terms of rate moves, with some lenders quickly shifting pricing, however from a borrowers’ perspective, rates are relatively stable and have been for some time.

“This stability should provide confidence for those looking to remortgage or move home. While this is the case, shorter-term fixed-rate options, notably the two-year fixed-rate product, remain highly attractive to remortgagers. These short-term deals offer homeowners flexibility, allowing them to adapt to changing market conditions and seize better opportunities in the short-term. With a positive start to the year, mortgage rates are currently lower than they were a year ago, leading to a further boost to consumer sentiment.”

More than £2bn of broker revenue could be unlocked in retrofit supplier commission

More than £2bn of broker revenue could be unlocked in retrofit supplier commission

As brokers’ higher value purchase business gives way to increasing volumes of lower paid product transfer deals, surfacing new revenue streams is a vital way to stay profitable.

But a lack of awareness of the money-earning opportunity and the perceived barriers to engaging in retrofit conversations is holding many brokers back.

According to green software firm Propflo, the total value of incentives to brokers from energy efficiency improvement suppliers exceeds £2bn, with the potential of a £700 commission per property if a combination of three improvements were installed.

Habito, which has already begun sending targeted marketing about retrofit improvements to all homeowners in its back book with an Energy Performance Certificate of D or less, says the potential earnings should provide brokers with enough of an incentive to pursue the opportunity.

“It depends on a broker’s business model,” said Will Rhind, VP of mortgage advice and growth, Habito. “Some brokers don’t charge for advice and solely rely on procuration fees. £700 is a realistic average proc fee from doing a mortgage so if you look at it that way, you’re doubling the revenue you could potentially earn from a deal.”

Extra revenue isn’t the only benefit to adding retrofit referrals to your business model, adds Rhind. “If a broker can add value, the customer is more likely to return and tell their friends about where they got the advice from.”

Do brokers have to be retrofitting specialists?

“Brokers need to be experts in finance products not the green agenda,” said Luke Loveridge, founder and CEO of Propflo which offers a tool, GreenVal, which allows brokers and homeowners to see what retrofit improvements the property needs, the cost and its benefits.

Retrofit software tools can recommend the work a home needs based on its postcode and the data held against that property. Brokers can white label the tool on their website and email a link to clients with an EPC of D or below to let them know, ahead of an upcoming remortgage or at any point in the mortgage cycle, that improvements can be made to their home to boost its energy efficiency while recommending pre-vetted suppliers to do the work.

If the customer uses any of the suppliers the broker earns a referral fee and wins the opportunity to arrange the finance if needed.

Sell the business case to clients

“Brokers do, however, need a broad awareness of the benefits of energy efficiency improvements so that they can explain the business case to their clients,” said Loveridge.

Loveridge says it is not just about the return on investment – how long it will take for the saving in energy bills take to repay the cost spent on the improvement. There is also the expectation that post-improvements the property will be worth more or be more capable of defending its value.

There are also physical benefits such as being warmer in winter and cooler in summer and the opportunity to feel more secure in retirement or family life knowing that energy bills will remain at a stable level.

Incentives must improve

Rhind would like lenders to improve their green propositions to incentivise greater interest from both brokers and borrowers.

The chance to get £250 cash back on a green mortgage does little to encourage a borrower to improve their EPC rating or leave them with a lasting impression that their broker has offered value in helping them to improve their energy efficiency, says Rhind. He wants to see a higher proc fee paid for a green mortgage or retrofitting.

“If the value of the property is improved by retrofitting then that makes the lender’s whole back book lower risk which is a benefit for them,” he said.

He also wants to see innovation for high loan to value properties that need retrofit work. “If another valuation is done after the work and the value has gone up by, for example by £60,000, they could be switched to a lower LTV with a lower rate no questions asked.”

Foundation launches range for multiple BTLs on one title

Foundation launches range for multiple BTLs on one title

The buy-to-let (BTL) deals from Foundation Home Loans – which teamed up with the National Association of Commercial Finance Brokers (NACFB) last month – are available to individuals, portfolio landlords and limited companies and can be used for homes let on a standard Assured Shorthold Tenancy, short-term or holiday let basis.

The deals are available under the Solutions by Foundation range.

Foundation can lend against up to four individual properties or units on one freehold title – for example, where a number of farm buildings have been converted for residential BTL use, or where up to four units/flats within a single block are on one title rather than multiple titles.

Products include two- and five-year fixed rates, available up to both 65% and 75% loan to value (LTV), with rates starting at 6.69% for the two-year deals and 6.54% for five-year deals. The product fee is 2%.

The maximum loan size for 65% LTV is £3m and £2m for landlords with a 25% deposit. The minimum loan size is £100,000.

Tom Jacob, director of product and marketing at Foundation Home Loans, said: “By launching ‘Solutions by Foundation’ at the start of year, we have been able to look at more specialist lending requirements and to offer specific products that fit these niche areas, but are increasingly in demand.

“Increasingly, landlords are looking at ways to broaden their portfolio, increase their yield, and focus on different areas of the rental sector. The concept clearly has similarities with existing multi-unit freehold blocks [MUFBs], but in this scenario, we can lend on up to four dwellings or separate houses or flats on just the one title.”

Paragon and TMW add fee options to BTL range and cut rates – round-up

Paragon and TMW add fee options to BTL range and cut rates – round-up

Paragon has expanded its range of BTL mortgages for portfolio landlords by launching six five-year fixed rate products with 2.5% and £1,999 fee options up to 75% loan to value (LTV).

The 2.5% fee five-year fixed rate deal has rates starting at 5.35% for single self-contained homes with an EPC from A to C. Rates increase to 5.4% for properties with EPC ratings of D or E.

A deal, priced at 5.6%, for portfolio landlords purchasing or remortgaging houses of multiple occupancy (HMOs) or multi-unit blocks (MUBs) has also been added to the range.

Alternatively, the £1,999 fee option is priced at 5.7% for single self-contained homes with EPC ratings from A to C, increasing by five basis points to 5.75% for properties with an EPC rating of D or E, and 5.9% for HMOs and MUBs. A maximum loan size of £250,000 is applied to these products.

All products are available to landlords with four or more BTL mortgaged properties, applying in a personal name or using limited company structures in England, Scotland and Wales. Income coverage ratios are calculated in line with initial rates, and products are subject to an application fee of £299.

Louisa Sedgwick (pictured), commercial director at Paragon Bank, said: “Equally important as all of the number crunching is listening to brokers who have told us that low-fee options would offer a solution in scenarios where purchase prices are lower or capital doesn’t appreciate as quickly. This is where these products fit in.”

Earlier this month, the bank became a signatory of the Mortgage Industry Mental Health Charter (MIMHC).

 

TMW reduces rates

The Mortgage Works, meanwhile, has reduced rates on selected BTL and limited company deals by up to 0.4 percentage points.

The new rates include a limited company two-year fixed rate at 4.99% with a 3% fee, available up to 75% LTV.

On the individual BTL side of the business, selected rate cuts include a five-year fixed rate at 3.99% with a 3% fee available up to 55% LTV, and a fee-free five-year fixed rate at 4.59% available up to 65% LTV.

Earlier this month, the company amended its affordability criteria.

Unless PTs are fairly rewarded, brokers say growth of advice market is at risk – analysis

Unless PTs are fairly rewarded, brokers say growth of advice market is at risk – analysis

While some lenders have upped their product transfer (PT) proc fees in recent months, brokers want to see parity of fees between purchase cases and PT transactions.

They say only equal fees would fairly reflect the level of work necessary to comply with Consumer Duty regulations, Mortgage Charter commitments and the principles of giving borrowers whole-of-market advice based on their most recent circumstances.

 

Explosion of PT business

UK Finance’s most recent PT update showed that PT transactions in 2023 rose by 17 per cent year-on-year from 1,274,240 to 1,491,750.

Meanwhile, more profitable revenue streams such as first-time buyer and homemover mortgages have plummeted. Last year, homemover mortgages, which pay much higher proc fees, dropped 26 per cent to 251,000; their lowest level since 1974.

Despite the explosion in PT business – of which brokers are responsible for placing around half – and the responsibility they have to carry out a full fact-find and research the entire market before a PT can be recommended, many lenders still pay the nominal 0.2 per cent proc they did in 2018.

Richard Howes, director of mortgages at Paradigm Mortgage Services, said: “Our market needs and depends on a healthy, thriving and financially profitable adviser sector.

“The PT market is driving advisers’ profits down, which is not conducive to long-term growth. Surely it’s the aim of every lender to be working with profitable firms?

“We could use other words in this context, for example, that it’s not fair on advisers. But ultimately it doesn’t make sense to pay below commercially what is right and needed. Perhaps lenders should accept this and now start to act.”

 

Reluctance to increase fees

Mortgage Solutions approached the five largest mortgage lenders, excluding Halifax, which already pays equal fees for its business, followed by Skipton and Leeds Building Societies, Accord and TSB, to ask if they had any plans to increase their PT proc fees.

Santander said its 0.2 per cent reward was in line with the wider market and did not indicate any plans to change that. Barclays would not disclose its PT proc fee, but said it was competitive. The lender said there was a difference in proc fees for new business activity, which required a significant amount of work from brokers, and a rate switch. Nationwide said it had no plans to change its proc fees. No other lenders responded.

Halifax pays the same amount for purchase and PT business. Its view is that the bank’s proc fees should reflect the level of work involved in the transaction, and it sees the cost of proc fees on PTs as something that provides value.

More recently, Family Building Society has made the same change. Bank of Ireland upped its rate in January, but not to match its purchase transactions.

Mark Humphrey, director of MHC Mortgage and Protection Ltd, said: “This argument has become louder due to a drop in broker income as PT business has increased and purchase business has reduced. However, the argument is about being paid for the advice we’re giving – which often follows the same process and takes a significant amount of our time, effort and expertise, no matter how the borrower proceeds.”

Humphrey says PT transactions now make up 33 per cent of his business, up from 19 per cent the year before. He said the firm’s average loan size is £250,000. For a remortgage or purchase case they might expect £1,000 to £1,200 in income (proc fee + broker fee), but for a PT this falls to around £400-500.

So how are brokers making up this loss of earnings?

“The simple answer is that we’re not,” said Humphrey. “It’s been a particularly tough year in business. The cost-of-living crisis puts additional pressure on family spending, which is making it more challenging to sell protection, so our income is down on several fronts.”

In a recent lender conference, he added, several lenders said that any increase in their PT proc fees would have to be funded from another source, such as a higher mortgage rate or smaller proc fees for remortgages and purchases.

“Halifax pay an equal proc fee for both,” he added, “which demonstrates that the pricing model can work if there’s appetite from lenders to support brokers.”

 

Money for nothing?

Lenders argue the work that goes into a PT is not equal to a purchase, which is why the two types of business are rewarded differently.

Brokers beg to differ.

They say that, since new rules were introduced under the Mortgage Charter that said lenders should allow borrowers to lock into a new deal six months before their old one expires, this has created even more work for PT transactions, as rates must be monitored and circumstances reassessed before the switch happens.

And new regulation that promotes the best consumer outcomes for borrowers means a full fact-find should not be skipped.

Alistair Ewing, managing director of The Lending Channel, added: “The issue is more about the current process rather than simply comparing proc fee levels.

“To fully assess a client’s current circumstances, the broker should really complete a full fact-find – especially since Consumer Duty has been implemented. While lenders don’t insist that a full new fact-find be completed, this will deliver the best value for the client. How can a broker properly advise a client they may not have spoken to for five years without one? A full proc fee should be paid to recognise this work.”

Rory Joseph, group director at network JLM Mortgage Services, added: “The arguments that advisers don’t do any work for PTs or it’s money for nothing are not just wrong but offensive to our community. We hope others will follow Bank of Ireland here, even if they are not willing to go quite as far as LBG lenders crucially do.”

 

Opportunity for competitive advantage

“Will other lenders follow the likes of Bank of Ireland, Family and Halifax?

“Who knows as yet,” said Joseph. “But in a highly competitive marketplace where you may have no chance of competing on rate, perhaps a recognition of what advisers actually do for PT business and how there should be greater proc fee parity is a chance to come out into clear ground and be recognised for it.”

PT proc fees were a key topic at the British Specialist Lending Senate 2024, and last year, brokers called for alignment in PT proc fees.

The Exeter adds two hires to senior team

The Exeter adds two hires to senior team

Ali Law joins The Exeter as chief information officer (CIO), having served as a consultant and CIO with over thirty years of experience in digital transformation, change delivery, and IT.

Law previously served as group head of digital transformation at Royal London. More recently, he was a managing partner at Hayna Partners, working closely with businesses to help them modernise their technology offerings and understand the implications of digital transformation.

Law will lead The Exeter’s IT department and serve on the executive committee, allowing him to bring the company’s IT vision to life.

Toby Bainbridge will join The Exeter as head of insurance solutions from 1 April in a newly created role, reporting to the company’s commercial director, Michael Payne.

With a distinguished career spanning nearly two decades in the insurance industry, Bainbridge brings a wealth of experience in underwriting, data analysis and reinsurance.

Prior to joining The Exeter, Bainbridge held senior positions at insurance firms including Royal London, LV=, Munich Re, and Legal & General. During his most recent role at LV=, he served as director of protection, during which he was accountable for the company’s data, underwriting and claims philosophy.

Isobel Langton, chief executive at The Exeter, said: “Ali and Toby bring a wealth of experience and knowledge with them that will further strengthen key areas of our business to help us deliver our future strategy and provide exceptional experiences for our members and advisers.”

In November last year, the company added a number of services to its Healthwise app.

Precise expands BTL range for landlords with credit problems and cuts rates

Precise expands BTL range for landlords with credit problems and cuts rates

This is following a market-wide rise in credit difficulties reported by UK Finance.

Current tier one 80 per cent loan to value (LTV) rates have been cut by 50 basis points.

Meanwhile, tier two and three BTL ranges have been added for adverse cases, with rates starting from 5.19 per cent.

Adrian Moloney (pictured), group intermediary director at OSB Group, said: “These buy-to-let changes reflect the challenges that UK Finance highlighted in its quarter four results, which showed that a percentage of landlords as well as homeowners were struggling with their finances.

“As well as reducing rates, we’ve widened our acceptable adverse criteria on buy-to-let properties with tier two and tier three products.”

According to UK Finance Q4 data, BTL mortgages in arrears increased 18 per cent to 13,570 compared to the previous quarter.

Homeowner mortgages in arrears increased seven per cent to 93,680 compared to the previous quarter.

 

RICS launches Retrofit Standard to raise bar on quality of efficient home improvements

RICS launches Retrofit Standard to raise bar on quality of efficient home improvements

RICS says the Retrofit Standard will ‘revolutionise’ current retrofitting practices, which will move the country closer to its goal of achieving net-zero carbon emissions while providing homeowners with better advice and services.

The goal of any retrofit project carried out by a RICS member is to improve the energy efficiency of the home and improve the wellbeing of the person living there.

Retrofit improvements can range from identifying and repairing defects in the home that need to be rectified before energy-efficiency improvements can be made to improving levels of insulation, airtightness and the supply of ventilation to the property.

Other measures include managing moisture in the property, installing efficient heating and cooling systems and providing efficient water heating and lighting systems.

The standards, which come into effect from 31 October, were written by a team of retrofit experts following an eight-week consultation period.

Under the new regime, RICS members must work within a framework to ensure they give the best advice to homeowners on retrofit options. It has been designed to support surveyors and provide assurance to both consumers and lenders.

The energy efficiency of our homes has increased in importance among buyers and sellers, according to a RICS survey carried out in January.

Just less than 40 per cent of surveyors said they had seen an increase in demand for homes that were more energy efficient than equivalent properties compared to 34 per cent in June last year.

Meanwhile, 26 per cent of surveyors said buyers had highlighted poor energy efficiency as a reason for making an offer below the asking price, compared to 23 per cent in the previous year.

 

‘Market need’ for a standard ‘that facilitates quality, reliability and consistency’

Under the standards, which include mandatory and recommended requirements, surveyors must:

Paul Bagust, RICS head of property practice, said: “As homeowners increasingly look to explore ways to retrofit their homes to improve energy performance, it is critical that advice is given by a highly qualified professional.

“It is clear, especially from the results of the extra questions added to our monthly residential survey, that there is a market need for a standard that facilitates quality, reliability and consistency, and the RICS Retrofit Standard does just that.”

RICS noted a positive shift in buying and selling activity in the housing market in February.

Rogue London landlord ordered to pay £226k for flat conversion

Rogue London landlord ordered to pay £226k for flat conversion

Pathfield Estates had previously been ordered to return the property in Bounds Green to its original condition by a 2008 planning enforcement notice after the landlord had converted it into five flats without permission. An investigation carried out in 2020, however, uncovered a new six-flat conversion.

The breach of the enforcement notice led to Pathfield being convicted at Highbury Magistrates Court in 2021.

The magistrates referred the case to the Crown Court for sentencing and the start of confiscation proceedings brought by the council under the Proceedings of Crime Act (POCA).

Pathfield lodged two appeals against the conviction both of which were dismissed.

At its sentencing last month, the company was ordered to pay £226,433 made up of a £50,000 fine for not complying with the enforcement notice, a confiscation order under POCA of £163,258 to reflect its financial benefit from breaching the enforcement notice and a further £13,175 in costs.

Haringey Council’s cabinet member for housing services, private renters and planning, Cllr Sarah Williams, said: “This conviction serves as a warning to disreputable landlords operating in our borough.

“Our residents deserve to live in safe, high-quality homes and we will not hesitate to take strong action if landlords flout planning laws or leave tenants to languish in poor conditions.

“I want to thank our planning enforcement team who worked tirelessly to get this result.”

Legal and General ups LTV and adds pricing options to lifetime mortgage

Legal and General ups LTV and adds pricing options to lifetime mortgage

The new pricing approach from Legal and General Home Finance means that equity release borrowers who commit to servicing their interest by selecting this deal will be offered interest rates based on the age of the youngest borrower, which could be lower than a rate based on the age of the oldest applicant. The interest rate offered will also be based on whether the borrower is a sole or joint applicant.

A higher LTV of up to 74 per cent is extended to sole borrowers, while joint applicants can access an LTV of up to 55.6 per cent.

The change follows Legal and General’s similar individual pricing approach to its Interest Roll Up Lifetime Mortgage and Optional Payment Lifetime Mortgage products, which help advisers provide customers with the best rates for their specific circumstances.

David G Jones (pictured), distribution director at Legal and General Home Finance, said: “Our Payment Term Lifetime Mortgage product offers more choice for homeowners who are sitting on equity in their homes but can’t access this because of their age and borrowing needs.

“The product is designed to provide customers access to higher LTVs as they commit to service their interest. This also means they benefit from a lower cost of borrowing, when compared to Interest Roll Up Lifetime Mortgages.”

Last month, Legal and General Home Finance announced an integration with the Advise Wise platform.