‘People using execution-only will find their journey a lot more challenging than they expected’ – poll result
However, the FCA contends that an execution-only process is no riskier than an advised one and that UK borrowers could save a £100m pounds as a result.
So, Mortgage Solutions’ latest poll asked brokers whether they are concerned by the potential resurrection of execution-only sales as a real force in the mortgage market.
Around 36 per cent of brokers said they are very concerned, with 38 per cent saying they are moderately worried because it could cause problems if not handled well.
Nine per cent of brokers said that they are a little concerned because they cannot see too much risk from it.
Around 17 per cent said that it will only be limited take-up from knowledgeable people, so they are not worried at all.
Mark Stallard, managing director at House and Holiday Home Mortgages, said: “Brokers are concerned because following the Mortgage Market Review, we were told that customers needed help and advice and intensive checks would need to be made for affordability purposes and detailed advice would need to be offered in most cases. I don’t understand what has changed?
“My personal experience is that lots people from all walks of life want brokers to help them. Either because they have not got the time, inclination or understanding to do it themselves.”
Stallard said that a lot of people using execution-only will find their journey a lot more challenging than they expected.
He added: “Day after day a broker starts with what looks like a simple case only to find all sorts of pitfalls and traps in the detail.
“We have seen a lot of very savvy first time buyers come to us for help even though they could have done it themselves. Like most major transactions in life, help is always welcome from trusted sources.
“Brokers are concerned naturally for their livelihoods and for the way it will pan out for good customers if they are enticed away. We will just have to keep banging that drum to our client banks as to what value we add.”
Small part of the market
James Chisnall, director at City Finance Brokers, said that as professional advisers, their role is to discuss in detail their clients circumstances and future plans with a view to making a formal recommendation based on that client’s specific needs.
He said: “The recent FCA consultation paper proposed making the process clearer for clients who would not be taking advice. It also aimed to reduce the amount of detail on regulated firms’ policies in this area.
“Execution-only sales have always represented a very small part of the intermediary market. An example would be a high net worth client who is fluent and sophisticated with the financial market and knows exactly what they want – they simply need a broker to process the case for them.
“Frankly, this happens so rarely that I don’t see execution-only sales ever becoming a competitor to good, quality advice, particularly if the advisory process has been followed correctly.”
Some clients fully equipped to make decisions
Dominik Lipnicki, director of Your Mortgage Decisions, said: “There has always been space for execution-only sales within the market. Some clients know exactly what they want, they are fully equipped to make decisions by themselves, while the majority might prefer an advice process with a wide range of options.
“Everyone is different and as brokers we shouldn’t be worried but we should move with the times. There is no point in fighting changes because they will happen anyway.”
Chris Sykes, mortgage consultant at Private Finance, said: “From our perspective, the resurrection of execution-only mortgages is a troubling development in the mortgage market. Mortgage advisers are qualified and regulated for a reason, and that reason is to bridge the information gap that exists between borrowers and lenders. Lenders sell products, whereas advisers sell solutions.
“We frequently find that the products our clients have in mind when they first approach us are far from optimal; the advice we provide can therefore prove to be extremely valuable, averting our clients from a course of action that would have left them burdened with suboptimal financial entanglements.
“None of this is a great surprise: the mortgage market is a confusing place; consumers cannot be expected to navigate this terrain without the support and advice of an experienced consultant.
“The worry we have, therefore, is that borrowers will approach lenders without having received advice from a qualified consultant, and that they will take out mortgage products that do not serve their best interests.”
Market focused on underlining reasons for using advisers
David Hollingworth, associate director at L&C Mortgages, said: “The results of the poll show that brokers are taking the potential for a return to execution-only very seriously indeed.
“That’s good news as it suggests that the market will be very focused on continuing to underline all the good reasons for using an adviser. Many borrowers have already switched onto the benefits of advice, particularly as they have faced a market where the right criteria choice is as important as the interest rate.
“Product transfers could be seen as an area where borrowers might be tempted to use execution-only options with their lender but that still doesn’t assure them that they have the best rate in the market. Brokers can factor transfers in alongside a broader shopping around of the open market, so need to accentuate that they can offer the best range of options to their customers.”
L&G Mortgage Club adds Ipswich BS exclusive as TSB cuts rates – roundup
Legal and General Mortgage Club members will have access to a five-year fixed rate residential product, available at 95 per cent loan to value (LTV) exclusively through the mutual.
Starting from 2.99 per cent, the product has a minimum loan value of £25,000 and a maximum value of £500,000 with fees of £499, consisting of £199 upfront and £300 upon completion.
The product is aimed at helping first-time buyers with a small deposit get onto the property ladder as well as providing an option for customers looking to remortgage out of the Help to Buy or Shared Ownership schemes.
Danny Belton, head of lender relationships of Legal and General Mortgage Club (pictured), said: “It is great to see an increasing number of lenders offering 95 per cent LTV mortgages, allowing buyers with small deposits to achieve their homeownership goals and providing more options for those looking to remortgage out of either Help to Buy or shared ownership.
“Legal and General Mortgage Club has been working closely with Ipswich Building Society to develop this offering and we are excited to work together to further build and support this proposition, bringing exclusive products to our key partners.”
Richard Norrington, CEO of Ipswich BS, said: “We are delighted to offer this exclusive deal to Legal & General Mortgage Club, which is ideal for applicants purchasing with a low deposit or remortgaging with a small amount of equity in their home.
“For aspiring first-time buyers receiving help from their family we welcome applicants using gifted deposits, and can consider entirely gifted funds up to 95 per cent LTV with 12 months rental history or 90 per cent LTV without.”
TSB reduces rates for homebuyer and remortgage borrowers
TSB has reduced interest rates by up to 0.10 per cent on mortgages for home buyer and remortgage borrowers.
Changes include reductions of up to 0.10 per cent on selected five-year fixes for purchase and remortgage, with LTV ranging between 0 and 85 per cent.
Further reductions of up to 0.05 per cent on selected three-year fixed remortgage rates, with LTV ranging between 0 and 75 per cent.
Nick Smith, TSB’s head of mortgages, said: “At TSB we want to help more people to borrow well and these changes are an example of us doing exactly that. The interest rate reductions on our fixed rate products are a welcome step for those looking to fix their monthly payments for a longer period of time, with the added bonus of free legals or £300 cashback.”
Maximum LTV breaks into top five search terms in second charge and bridging – Knowledge Bank
Within the second charge, maximum age at end of term was the biggest search term, followed by mortgage or secured loan arrears or defaults.
Within the bridging sector, regulated bridging as well as maximum term and loan were among the top five criteria searches.
Lending to limited companies was the biggest search term within the buy-to-let sector, followed by first-time landlord and requirement to be a homeowner.
Within the residential sector, maximum age at end of term was the biggest search term, followed by self-employed with one year’s account and maximum age at application.
Nicola Firth, CEO of Knowledge Bank (pictured), said brokers were becoming increasingly aware that it was no longer about the borrower choosing the lender but the lender choosing the borrower.
She added: “When we’re out and about talking to brokers about Knowledge Bank we very often have conversations with advisers who have started an application for a product only to later find out that their client falls outside of a criteria condition.
“This is hugely frustrating for both broker and client as the search process has to start again, which means delays and disgruntled clients. Additionally, with ever increasing, and ever-changing, regulation it is crucial that brokers can defend their product selection when it is based on criteria restrictions and not price.”
Legal and General puts first affordable homes up for sale
The four schemes include 278 homes in Croydon, Cornwall, Dunstable and Shrivenham.
The first of these homes to be completed are in Leon House in Croydon and will be available this month, comprising 50 shared ownership apartments.
Legal and General has also secured a pipeline of over 40 sites across the UK, providing 1,500 affordable homes in the next 24 months.
It expects to deliver 3,000 affordable homes annually within the next four years.
Joint Venture with Coastline
Legal & General’s second acquisition in Cornwall represents a joint venture with Coastline Housing Limited. With Legal & General’s financial backing, this will support Coastline in its ambition to double its affordable housing completions to 600 per year.
The partnership’s first scheme in Falmouth will comprise 44 affordable homes across two building phases, available from June 2019.
Legal & General Affordable Homes’ other two schemes in Dunstable and Shrivenham are being delivered under Section 106 agreements. Phoenix Park in Dunstable will be available to buyers from Q4 2019, comprising 23 shared ownership apartments.
Its scheme in Shrivenham has been acquired from Legal & General’s own house building arm, Legal & General Homes. This will deliver 109 homes at affordable rents and 52 shared ownership units. Homes will be available during the first half of 2020.
Delivery of affordable homes to be accelerated
Ben Denton, managing director of Legal & General Affordable Homes, said there was an urgent need to accelerate the delivery of new affordable homes.
He added: “We have made a great start in executing our development programme, alongside building our customer service platforms. Today marks the real start of our journey as we deliver our first affordable homes, working alongside high quality local providers to tackle the growing crisis.
“As demonstrated by the scope and range of our acquisitions today and the significant pipeline we have secured, we remain committed to offering a choice of tenures to our future residents; deploying institutional capital at scale and pioneering new partnership models, such as the one we have set up with Coastline.
“This range of routes to market will help us meet our ambition to become a leading affordable housing provider in the UK and delivering the volume of affordable homes which the country desperately needs.”
Nathan Mallows, director of finance of Coastline Housing, said: “This new joint venture partnership with Legal & General is the culmination of over a year of collaborative working; shaping an alliance that seeks to solve Cornwall’s housing need through long term, institutional investment, coupled with local knowledge and management expertise.
“Providing excellent customer service and increasing the provision of affordable housing is a mutual ambition.”
Avamore secures long-term funding line to offer cheaper rates
Since closing the agreement at the end of Q1 2019, the lender said it had completed a number of transactions at the new rate.
A spokesperson from Avamore told Mortgage Solutions that this was “a long-term deal,” but that the lender could not disclose any further information at this stage.
The first transaction was closed in April on a two-storey detached building in Wembley Park which the developer is converting into eight self-contained flats.
The loan was about £1.7m with an loan to gross development value (LTGDV) of 65 per cent. Others include a £500,000 deal on the conversion of an ex-pub into 10 residential flats and one retail unit in Luton, and a £2.2m facility with a repeat borrower in Tonbridge, Kent.
Zuhair Mirza, principal at Avamore, said: “Over the last 12-months we have passed significant landmarks including obtaining our first ever institutional funding line, launching a market leading product and passing £100m of lending.
“It is important to us that we remain true to our initial values and so, we continue to be transparent, responsive and predictable providing the service expected of a small specialist lender but now, we have market leading rates to accompany that.
“We wanted to pilot the new conversion product in the market before announcing the lower rate. We are excited to now make this public announcement and look forward to supporting brokers and borrowers in their conversion projects.”
The borrower on the first transaction at the 6.5 per cent rate, Matthew Jordan, said the pricing on the loan was appealing and he was pleased with the service.
PRA changes are ‘forcing landlords to take products which do not fit their plans’ – Marketwatch
So, this week Mortgage Solutions asked brokers whether they see borrower demand growing, what the reason behind this is, and how likely they are to recommend them for their clients.
Simon Jones, director at Affinity Mortgages
Over the last three years we have seen a general shift away from two-year fixed rates to five-year products, with cost of funds being a key driver of customer behaviour.
The discrepancy in rate is largest between 95 per cent loan to value (LTV) and lower brackets, however this gap has reduced significantly over the last five years. The difference between two-year rates at 80 per cent LTV and 90 per cent LTV now averages 0.5 per cent, whereas it is just 0.25 per cent on five-year products at the same LTVs.
We still see some reluctance from some first-time buyers to lock in for longer at initial purchase due to the general uncertainty surrounding their future. For this reason, we are doing more two-year fixed rates in this area, peppered with the occasional three-year rate, especially at higher LTVs.
This changes when you get to second-time buyers and re-mortgage application, with lower LTVs, where the demand for five-year products jumps massively. These are specifically prominent in buy-to-let applications where a greater loan size can be achieved due to more generous stress tests.
A key driver of longer-term products is the impending uncertainty around Brexit, which thankfully, the length of this commentary prevents me from remarking on further.
Another factor is the education from our lending partners who have advised that swap rates are lower than they have been in a while, which in turn has led to more competitive short term rates.
Coupled with this is the confidence lenders have in the base rate holding at current or similar levels, which enables us to impart invaluable information which the clients are then able to use in their decision as to which products they opt for.
James Chisnall, director at City Finance Brokers
Rates are fantastically low at present and with all of the uncertainty around Brexit, why wouldn’t someone want to fix long term?
Especially when the alternative is to go on either a variable rate which is likely to only increase, or fix for two years and take a gamble on what the client will refinance to when their deal ends?
With the pricing of longer term fixed rates being such great value, and not a million miles from two year money, we are seeing a great deal of borrower demand.
By the time you’ve factored in the cost of refinancing in two years, the difference in pricing is often reduced further and you have the certainty of being able to budget for longer, meaning this would be a great recommendation for many clients.
However, what we recommend very much depends on the individual client and their future plans. Somebody looking to sell within a few years might not be suited to a longer term fix and its accompanying exit penalties, for example.
A lot of buy-to-let landlords are being forced down the five-year route as these products have more generous interest cover ratio (ICR) calculations compared to two-year rates. Many landlords, particularly portfolio clients, want to have the flexibility that shorter term rates offer.
The Prudential Regulation Authority (PRA) regulation has seen that change dramatically and a huge number of landlords are being forced to take a product which does not really fit their future plans and aspirations, yet is the only way to get close to the borrowing requirement.
Alex Smith, senior mortgage and insurance adviser at Capricorn Financial
I have definitely seen an increase in the demand for longer term fixed rates, with five-year fixed rates being the most common.
The narrow spread between two- and five-year fixed products at certain loan to valuations makes it easier for borrowers to consider a longer product term.
This and the slower pace of house price inflation, and ever burdensome cost of stamp duty, means people tend to have a longer term view with property purchases overall and their mortgage choice is beginning to reflect that.
However, longer term fixed rates are not suitable for everyone, and it very much depends on where the individual is in life.
For example, those upsizing to family homes tend to favour five-year fixed term products provided there are no plans to disturb the mortgage in order to capital raise for home improvements in the short term, or make a large lump sum overpayment to reduce the mortgage.
Conversely, first-time buyers are often better suited to short term products, and those with smaller deposits of five per cent may find a five-year deal too expensive to begin with.
From an advice perspective, the length of fixed term a client embarks on is one of the most important considerations given the potential downside of stiff early repayment penalties. By taking the time to understand a client need and ensuring they understand the benefits and limitations of the various product terms on offer I’m happy to recommend them, and do so on a regular basis.
MCI Mortgage Club adds Kent Reliance to panel
MCI Mortgage Club brokers will be able to access Kent Reliance’s range of specialist buy-to-let and residential products.
They include large property portfolios, houses in multiple occupancy (HMOs), limited company lending, expats, complex income and large property cases.
Adrian Moloney, sales director of OneSavings Bank (pictured), said: “We are really pleased to have launched with MCI Mortgage Club as we know that advisers are dealing with an increasing number of complex borrowers and those with specialist lending needs.
“At Kent Reliance we use our extensive expertise and knowledge to provide bespoke solutions with a commitment to intermediaries that provides real value and we look forward to sharing our proposition with MCI Mortgage Club members.”
Phil Whitehouse, head of MCI Club, said that he looks forward to working with the lender and its sales teams.
Vulnerable people allowed to transfer support for mortgage interest when moving home
SMI is the help offered by government to owner-occupiers in times of need. It is paid as a loan and contributes towards the interest on people’s mortgages if they are in receipt of certain benefits, to protect them against repossession and keep them in their own homes.
This change will benefit those moving into a new property due to a disability or health condition, as they will continue to receive uninterrupted support towards their mortgage payments.
Previously, those receiving a SMI loan were required to repay the balance once a property was sold or transferred, provided there was enough equity after the mortgage was paid off.
They would then be asked to reapply for the loan on their new property.
The Ministry of Housing, Communities and Local Government said the policy shift would ensure those looking to move home to secure better employment will not face barriers to progressing in work.
Helping vulnerable people live independently
Will Quince, minister for family support, housing and child maintenance, said this measure helps some of the most vulnerable people stay in their homes and live independently.
“And we are now making it easier for people to keep this support, even when moving house,” he added.
MySafeHome Limited managing director David Abbey said that allowing vulnerable people with disabilities to port their SMI loan reaffirmeds the government’s support for Home Ownership for people with Long-term Disabilities.
He added: “We’re delighted that this change should give many more individuals the opportunity to choose where and how they live their lives.
“The ability to transfer an SMI loan balance will also apply to those who have previously received this form of support but are no longer claiming benefits.”
Coventry BS, Newcastle BS, Ipswich BS and Pepper Money cut rates – roundup
Coventry for Intermediaries has cut rates across its two-year fixed owner-occupier mortgage ranges by up to 0.20 per cent.
The rates have been reduced to 1.35 and 1.69 per cent from 1.55 and 1.89 per cent, respectively.
The lender has also reduced rates on its three- and five-year owner-occupier ranges and fixed standard buy-to-let products.
Kevin Purvey, director of intermediaries (pictured), said: “The next few months will see a lot of borrowers’ current mortgage deals coming to an end, so these products are ideal for those looking to secure their remortgage deal as early as they can.
“And it is good news for landlords too, as we’ve reduced fixed rates on standard BTL products”.
Newcastle Intermediaries has reduced rates on its five-year 95 per cent loan to value (LTV) mortgages by up to 0.16 per cent.
A five year fix of 3.09 per cent is a 0.16 per cent reduction, coming with fees of £498 and 10 per cent overpayments allowed per annum.
Alternatively, for borrowers not wanting to pay any fees, a 3.35 per cent fix for five years is available at 95 per LTV and is a 0.10 per cent reduction.
They both provide an early repayment charge of five per cent until 31 July 2020, four per cent until 31 July 2021, three per cent until 31 July 2022, two per cent until 31 July 2023 and one per cent until 31 July 2024.
Stuart Miller, customer director at Newcastle Intermediaries, said: “We’re pleased to see that the first-time buyer market remains very active, and our reduction in rates supports buyers making their first step onto the housing ladder.
“These products would also suit those looking to re-mortgage and possibly increase their loan to make the most of some extra funding for home improvements for example. We’re also seeing an overall increase in five year mortgages with borrowers wanting more certainty around monthly payments and locking in longer term deals.”
Ipswich BS has developed a self-build hub, designed to offer advice on the self-build mortgage market and to make it easier for intermediaries to support their self-build clients.
The hub, which sits on the society’s intermediary site, consists of a purpose-built, digital location hosting the society’s entire library of self-build content, including a collection of useful guides, downloads, and a step-by-step process of how to submit a self-build mortgage case.
Also, the society has improved its existing self-build offering by reducing the product interest rate. The two-year rate has been cut to 3.99 per cent from 5.74 per cent, including a £1,000 completion fee and £199 application fee.
Self-build mortgages are available on projects, conversions, renovations, and knock-down and rebuild projects, with loans up to the value of £750,000 and a maximum 80 per cent LTV.
Richard Norrington, CEO at Ipswich BS, said: “Self-build is an increasingly popular market, with more people seeking to build from scratch or make large scale renovations to suit their family circumstances and requirements.
“By hosting all of our self-build content on a centralised, easily-accessible platform we have created an invaluable tool for brokers, and I am confident that the hub will help cement our position as the go-to place for mortgage intermediaries with self-build cases.
“We also hope that by providing a comprehensive overview of the self-build process, we can reassure brokers who may be less familiar with this type of product that self-build cases aren’t as complex as they may first appear.”
Pepper Money has launched rate reductions across nearly all residential and BTL products.
Rates have been cut by up to 0.15 per cent on most products, including Pepper Money’s DMP range for customers in active debt management plans.
Rates on Pepper 18 for clients who have adverse credit in the last two years but no defaults, CCJs, mortgage or secured loan missed payments and arrears in the last 18 months, are available from 3.56 per cent.
Rates on Pepper 12, for clients with a clean record in the last 12 months, are available from 3.59 per cent and rates on Pepper 6, which is available for clients who have had zero defaults or CCJs in the last six months and zero mortgage or secured loan missed payments and arrears in the last 12 months, start at 3.93 per cent.
Clients with an active debt management plan (DMP) can access rates from 3.63 per cent and Pepper’s Buy to Let products start at 3.48 per cent.
Paul Adams, sales director at Pepper Money, said: “With rates for borrowers who have had credit problems within the last two years available from 3.56 per cent, we are demonstrating to brokers and their clients that affordable mortgages can still be accessible to customers with adverse credit.”
Jane Benjamin, director of mortgages at Sesame and PMS, said: “Growing numbers of defaults and CCJs mean that more customers are looking for a mortgage with recent incidents of adverse credit on their record.
“It’s therefore good to see more lenders taking a pragmatic underwriting approach for borrowers in these circumstances, as well as offering rates in this part of the market that are increasingly competitive.”
Expats, bridging and experienced landlords likely to dominate BTL market in H2 2019 – Commercial Trust
Andrew Turner, chief executive of Commercial Trust Limited (pictured), believes that landlords with larger portfolios and more equity are better placed to make additional purchases and suggests they may snap up properties sold by anyone leaving the sector.
The changes that have taken place over the past three years have had an impact on landlords with smaller portfolios of one or two rental properties, he added.
Expat buy to let
As a result of Brexit, a depreciating pound has played to the favour of expats looking to invest in UK rental property.
Turner said there has been an increase in the number of lenders in the BTL expat market over the last year.
However, he clarified that with most lenders the applicant must be a UK citizen, needing to be an experienced landlord and able to provide a proof of income.
While the number of lenders offering expat BTL mortgages has increased, it remains a limited market and interest rates are usually higher.
In most cases, Turner said the lender will expect an expat to have at least 30 per cent of the property value as deposit.
Bridging and development growth
Turner also questioned if bridging and alternative financing would grow as homeowners stay put and instead choose to further develop properties in the hope of improving living conditions and perhaps adding capital growth.
“New planning application rules in England, are also encouraging people to extend properties. Property owners will no longer need a full planning application to extend a home,” he said.
“At the same time, permitted development rights will afford business owners greater flexibility when it comes to converting properties on the high street.
“Landlords who own shops will be able to convert these to office spaces without having to apply for full planning application.
“These legislative changes could serve as a catalyst for more people to look at conversions, potentially increasing demand for bridging loan finance and commercial or semi-commercial mortgage financing,” Turner added.
Rise in large portfolio landlords
Specialist lender Paragon reported an increase in the number of landlords with large portfolios, applying for BTL lending in the first half of 2019.
The lender found that 88 per cent of its total BTL business came from landlords using limited companies operating large portfolios, an increase of 16 per cent year on year.