Opportunities rife for advisers promoting advice on furlough and the self-employed – Kensington
In this exclusive video for Mortgage Solutions: High Street versus mainstream, our panel including Craig MacKinlay, new business director at Kensington Mortgages, Vikki Jefferies, proposition director at Primis Mortgage Network and Greg Cunnington, director of lender relationships and new homes, Alexander Hall debate the business drivers brokers could capitalise on this year.
Sponsored by Kensington Mortgages, McKinlay said as we come out of a recession, self-employment typically rises and at 15 per cent now, this will only increase.
“Work hard in this sector to get a good reputation and get out on social media and promote your skills on self-employed cases, said McKinlay.
Jefferies agreed, adding that infiltrating group and sector discussion forums like those of the IT sector is also a great way to work up a referral model, for example, groups debating the best way to tackle the IR35 tax status changes.
“I’m not saying brokers need to be tax experts, but if people are talking about something relevant to a sector like IR35, they will need mortgage advice, so don’t be afraid to ask for those referrals,” said Jefferies.
Self-employed as an obstacle
Cunnington said a lot of the self-employed cases that would have been waved through before the pandemic as vanilla are attracting more scrutiny now.
“We are seeing a lot of clients who think they won’t be able to get a mortgage or remortgage after all the negative stories about self-employed mortgages in the national press. But actually, if you talk to specialist lenders there are plenty of success stories out there,” he added.
It’s important that brokers promote their successes on social media and through case studies on the website to encourage this kind of personal referral activity, he said.
Watch the debate unfold below for more on the wins from manual underwriting, what brokers want from a business development manager (BDM) and Kensington’s moves into the Northern Irish market and its onward strategic lending plans.
Mortgage Brain deepens partnership with Harpenden BS; Twenty7Tec completes Apply integration with Accord
The pages break down the mutual’s lending criteria for both its residential and buy-to-let product ranges and offer filters ranging from the age of the borrower at application, to details about the property such as its acreage and whether it is being purchased at auction.
Criteria can be filtered based on a host of categories and topics, while there is also a dynamic search function meaning that potential criteria results are presented as the broker types.
The two businesses have already collaborated on the design of an affordability calculator for the lender’s intermediary website.
Craig Middleton, mortgage sales and distribution manager at Harpenden Building Society, said: “The new criteria pages are a fantastic addition to our intermediary website and will undoubtedly make it much easier for brokers to establish whether we can help with their client.”
Neil Wyatt, sales and marketing director at Mortgage Brain, (pictured) added: “We have always been clear about our determination to streamline the mortgage process and make it more efficient.
“Over the last year Mortgage Brain has embarked on a host of collaborations with forward-thinking lenders, putting our mortgage technology expertise to use in new and innovative ways which provide tangible benefits to brokers and their clients.”
Twenty7Tec completes Apply integration with Accord
Twenty7Tec has completed an Apply integration with Accord allowing users of CloudTwenty7 to submit applications to the lender without re-keying.
For this integration, Twenty7Tec has implemented IRESS Lender Connect software, which Accord is using to transfer data into its intermediary portal.
Users of CloudTwenty7 will be able to complete a decision in principle with Accord on the CloudTwenty7 platform with customer data which has already been captured. The information will then be passed on to Accord’s portal and submitted to the lender.
The integration with Accord is now in pilot with Mortgage Advice Bureau and Connells Group, with a plan to roll it out further to all CloudTwenty7 users in Q2.
James Tucker, CEO of Twenty7Tec, said: “We have been working with Jeremy and the team at Accord for some time now, jointly developing solutions for making the process of applying for a mortgage decision simpler, faster and more efficient.
“With this integration, we have achieved just that, and we look forward to rolling this out to all users of CloudTwenty7 shortly.”
Jeremy Duncombe, managing director of Accord Mortgages, said: “We’re really pleased to be integrating this technology with Twenty7Tec as we continue our digital journey to make it easier for brokers to do business with us.
“This solution, together with our MSO platform, will make a noticeable difference to the amount of time it takes brokers to place cases with us, freeing them up to spend more time with their clients.”
Specialist platform OMS delivers facial recognition ID verification
The system helps to navigate the previous requirement for certified ID, usually provided by a solicitor. ID is verified by using machine learning and facial recognition to check the applicant is the genuine owner of an authentic passport, driving license or national ID card.
OMS covers product areas such as residential, buy-to-let, second charge, equity release, bridging, commercial plus general insurance and protection.
It has already integrated with four platforms – Iress, Twenty7Tec, iPipeline and Knowledge Bank – to provide users with product, protection and criteria searches.
Neal Jannels (pictured), managing director of One Mortgage System (OMS), said: “Despite information security, data privacy and compliance cited as top priorities, a lot of intermediary firms tend to struggle with digital transformation projects. Nivo is quick to deploy, simple to integrate and the benefits are quickly evident.
“It’s an exciting product which will speed up and simplify an antiquated ID verification process across a mortgage market which is swiftly catching up to other areas of financial services from a tech perspective.”
Matthew Elliott, chief development officer at Nivo, added: “Lenders and brokers love Nivo because it makes it easy for them to offer the kind of modern mobile experience that customers expect.
“We’re proud of having over 2,000 five-star app reviews, alongside the speed and efficiency results, which prove that customers want to engage in this way.”
Second charge sees rise in large loans and home improvements – Grundy
In fact, we have seen an increase in interest from high-net worth individuals during the pandemic, and this has escalated since the start of this year.
From the end of the first Covid lockdown there has been more demand from high profile borrowers wanting large loans particularly for home improvements and property purchases. They have been turning increasingly to second charge mortgages to raise substantial amounts of money.
There is a need for greater flexibility in loan sizes which cannot always be obtained via a further advance or a remortgage to complete significant high end refurbishment projects. This in turn has led to us seeing a different type of borrower who typically owns high value property at £1m plus. With loan sizes available up to £500,000 at 65 per cent LTV and record low interest rates, second charges can be an attractive alternative to a remortgage.
Pandemic home improvements
The pandemic has changed the living requirements of many people who find themselves both living and working from home. They want more space for an office or to home school their children so there has been an uplift in extensions and loft conversions.
By being forced to spend more time at home due to lockdowns, people are looking to improve their surroundings so opt for a new kitchen or bathroom or completely redecorate the house. They may want to landscape the garden so they can have family and friends over in a Covid secure outside environment or create a children’s play area.
Often there is a large amount of equity in their home and therefore a smaller LTV. Their first charge mortgage rate is low which can mean it is often best advice to avoid disturbing existing mortgage arrangements; and in addition any early repayment charges would make it expensive to remortgage.
This is a great opportunity for brokers to advise people of another option, which is to raise the required finance via a second charge loan.
Because loan sizes are generous in the second charge market, terms can be flexible. For example, if a borrower has 15 years remaining on their first mortgage, they have the option of taking a second charge of up to 30 years. And this also includes flexible features such as the ability to make overpayments.
In addition, we are seeing more HNWs wanting second homes and using secured lending for the deposit. This can be for people living in city centre apartments wanting a rural retreat or a country or seaside bolt hole.
Conversely, there are borrowers taking advantage of the downturn in property prices in cities like London, particularly HNWs investing in buy-to-let property. The second homes and BTL investments have also been spurred on by the stamp duty holiday – now extended until the end of June.
We expect to see this trend in borrowers owning expensive property requiring larger loans to continue. The pandemic has changed our lives in many ways and our homes are seen as ever more important with people wanting to make improvements to their surroundings or acquire further properties for personal use or investment purposes.
Primis bosses heap criticism on FCA and FSCS fee blows and call for industry unity
“The sad reality of this is that these FSCS and FCA fees mean it costs more money to run a network and that will come down to all stakeholders in that network model at some point. Sadly, it might even hit consumers depending on the way the fee is restructured in future years with no end in sight.”
Jon Round, group financial services director, added: “This is just really, really bad business practice for us not to know the fees until half-way through the year.”
It’s hard to run a business with the level of fitness, properness and financial propriety expected with partial knowledge on the incoming fees, he added.
“This is not an insignificant amount of money. It contradicts the obligation to run your business on a sound financial footing,” he added.
Smith (pictured) said: “This is hitting the whole intermediary space. If you’re an Appointed Representative (AR), you’re part of a network, so we have some options in terms of how we charge this. If you’re a directly authorised firm (DA) you’ve got to pay this and you’ve got to pay all the fees up front.”
“We all represent our intermediaries who look after the end customer and this is the time to put down any competitive differences that you’ve got and stand together.”
Primis called for the industry to collaborate and work with the Association of Mortgage Intermediaries (AMI) which hit out immediately after the CP21/8 paper landed in April, which offered a five week consultation period.
AMI chief executive Robert Sinclair criticised both the regulator’s approach to getting networks in line and the huge FCA fee uplift expected to raise in the region of £10m with exact figures expected to be confirmed in July or August this year.
Against a backdrop of rising Professional Indemnity (PI) insurance costs, the industry is already reeling from a £17m hit from the Financial Services Compensation Scheme, confirmed in November last year, to pay for the scale of poor practice in general insurance, pensions and the investment sectors.
The FCA has already warned mortgage advice firms and networks growing their adviser bases to increase their compliance functions to match their rising numbers.
In October 2020, the Financial Conduct Authority (FCA) said it will be contacting firms and networks which have grown rapidly to ensure they were still maintaining sufficient oversight. It also continues to examine firms which have multiple trading names to ensure they are not illegally offering regulated advice from unregulated organisations.
Regulator admits structure wrong
When the fees consultation paper emerged on 20 April, the Financial Conduct Authority (FCA) admitted the current funding system ‘isn’t suitable’ and that it was proactively tackling rising regulatory costs by sharpening its teeth as a watch dog.
It said its increased focus on firms operating below standard will include a firmer approach to those applying for authorisation and making better use of data and intelligence to identify harm caused by authorised firms.
“We also want to work towards a system where firms which cause redress liabilities end up paying more of the bill before recourse is needed to the FSCS,” the FCA continued.
“This would be fairer and would further incentivise firms to achieve good outcomes for consumers. It would benefit firms of all sizes.”
Holiday-let market gears up in spring product refresh – Ying Tan
InterBay Commercial launched a range of holiday let products with rates starting from 3.84 per cent.
These products are aimed at personal ownership and limited company landlords looking to let out properties on a short-term holiday-let basis to meet the recent growth in demand. Loan sizes range from £50k up to £1m, with no maximum property value.
An interest-only option is also available and minimum ICR and stress rate requirements are 140 per cent using gross rent, with rent calculations based on a letting period of 30 weeks a year at an average of the low, mid and high season rates.
Market Harborough Building Society released a range of holiday-let products for simple and complex cases. This includes variable rates of 3.49 per cent for simple applications and 4.24 per cent for complex cases, with fixed rates available on request. The range is available for cases between £200,000 and £3m, up to a maximum 75 per cent loan to value (LTV) and is suitable for expats, applications involving Airbnb rentals and unusual properties such as multi-units or large acreage.
Staying within the mutual community, the Cambridge Building Society reintroduced a number of holiday-let mortgages. Notable products include a 75 per cent LTV two-year discount at 3.39 per cent and a 75 per cent LTV five-year fix at four per cent. Both offerings include a completion fee of £1,500 and early repayment charges.
Owners will be able to stay 90 days per year in the properties. In addition, Furness Building Society added to its holiday-let range via two five-year fixed rate products at 65 per cent and 75 per cent LTV, priced at 3.89 per cent and 4.29 per cent respectively. Both products include a fee of £1,250 which can be paid upfront or added to the loan.
This isn’t the only niche area of the BTL market which has seen activity levels rise over the past month. The Mortgage Works (TMW) launched a green further advance mortgage range, designed to support landlords in making their properties more sustainable. A rate of 1.49 per cent is available for loans of between £2,500 and £15,000 up to a maximum 75 per cent LTV, all of which come with no product fees. Landlords can opt for a two- or five-year fixed product, with rates for those making green improvements to their property up to 50 per cent lower than standard further advance rates. The whole loan must be used to fund a range of sustainable home improvements, including the addition of solar panels, window upgrade/replacement, boiler upgrade, air source heat pumps and electric car charging points.
Keystone Property Finance also released a product range for landlords with energy efficient properties. This is priced at 15 basis points lower than the lender’s core products and they will be available on properties which are five years or older with an energy performance certificate (EPC) rating of A to C. The green range is available for purchase or remortgage purposes and can be secured on all properties, including houses in multiple occupation (HMOs) and multi-units. The loan size ranges from £50,000 to £1m.
I’m not ignoring the large volume of product changes and criteria tweaks made across a highly competitive mainstream BTL marketplace, but in a time when landlords are looking to diversify and assess property-related costs, these areas represent interesting opportunities and viable options for many.
Last week, Ying Tan exited Dynamo after selling the business to Connells.
Product transfers: Benefit to the customer or the lender?
Well done to them, and why shouldn‘t they, after all they are commercial enterprises and they recognise a good client when they see one…certainly for an existing borrower who has proven a good risk.
Of course, this represents a challenge for advisers to support their client, for ensuring a hasty client decision on a product transfer doesn’t exclude the adviser – with all the consequences that entails – but that it also doesn‘t end up costing the client money.
The value of a mortgage broker
I saw a recent post on LinkedIn from Malcolm Davidson at UK Moneyman, which highlighted just such an issue, and reiterated just how important the role of the adviser is within a product transfer situation.
Malcolm wrote about a recent client who was presented with a product transfer option early. Unbeknownst to that client by making just a couple more mortgage payments, they would become eligible for a lower LTV product which came with a better rate, saving that client a not insignificant amount of money. His post was followed by other advisers reporting the same or similar examples.
Now, as advisers will no doubt testify, having that product transfer option ‘in the pocket‘, so to speak, can be of benefit, but by taking it early when better options will be available in just a short few months, the client could have been significantly worse off.
In a two-year period where house prices have tended to rise, and where many people have been overpaying on their mortgage, this next product maturity could be a good opportunity to not only benefit from those outcomes, but also the highly competitive mortgage market.
The client mentioned above – by making those two mortgage payments – became eligible for an 85 per cent LTV mortgage, when the initial product transfer option was at a higher LTV, and therefore higher price.
Incoming wall of mortgage business
IMLA recently suggested that there are 700,000 mortgages set to mature this year, and if the above doesn’t highlight the importance of continued advice for existing borrowers, I’m not sure what does.
As Malcolm highlighted, the client was completely unaware of what could be achieved and any early decision to product transfer would have probably rendered them unable to secure that better deal.
It seems highly unlikely that lenders are going to make their existing borrowers aware of such options directly, so without adviser intervention, they would have paid more for the next couple of years than they needed to.
Much is made about the smooth process, the quickness of transfers, and the fact that, for example, the client doesn’t need to pay for conveyancing, etc, but advisers must still hammer home the benefits of advice in this and any other market interaction. Ongoing communication especially in the build up to maturity has to focus on clients not taking the first product option on offer and giving the adviser the opportunity to look at what can be achieved.
Product transfers continue to take a bigger share. As an industry we, and the borrowers involved, need to ensure that as many as possible are only taken with advice that shouldn‘t be undervalued.
Mortgage products up 53 per cent as borrowing breaks BoE records
With 3,927 products now on offer, net borrowing levels in March were higher than October 2006 at the peak of the pre-financial crash mortgage boom, according to Moneyfacts.
Moneyfacts suggests this shows lender confidence that ‘demand will remain prevalent in the coming months’.
Research showed there are now 78 more deals at 95 per cent loan to value (LTV) and 41 more at 90 per cent LTV in March against the month before, well ahead of the launch of the government guarantee scheme in mid-April.
Spike in 95 per cent LTV deals
The data showed growth in availability was cross-tier, but the most significant increase was at 95 per cent LTV, which rose from 34 deals last month to 112. In good news for smaller deposit holders, the proportion of the market where deals are available at 80 per cent LTV or above has risen to 49 per cent against 31 per cent this time last year.
After nine months of increasing rates, the average two-year fix dropped marginally by 0.01 per cent to 2.57 per cent, but the average five-year fix rose by 0.02 per cent to 2.79 per cent.
The average length of time a mortgage is offered to borrowers also increased by three days to 32 offering applicants longer to secure their product.
Eleanor Williams, finance expert at Moneyfacts, said: “The sense of optimism in the mortgage sector continues, with product choice continuing its climb back towards pre-pandemic levels.”
Housing supply remains an obstacle for would-be buyers, she added, and that this shortfall may well continue to drive up house prices.
“Lenders have been vocal about their confidence in the mortgage market as the UK lockdown eases, which is refreshing to see after the turmoil the pandemic created for home movers and those looking to switch their deal for all walks of life.
“There has been a reduction to the average fee charged (excluding no-fee deals) compared to last month,” she added.
Vikki Jefferies, proposition director at Primis Mortgage Network, said: “The work of advisers will be a huge asset to lenders who are driving the increase in product availability, particularly amongst those who have been disproportionately impacted by the Covid-19 crisis. Advisers will be especially key in highlighting the variety of solutions that are available to younger borrowers, which will also go a long way towards boosting confidence among this cohort.”
“Over the coming months, lender appetite and buyer demand will continue to grow as the UK’s vaccine roll-out and economic recovery progresses. It will be encouraging to see all sides of the mortgage market working together further to support this activity and underpin our road to recovery,” she added.
ASA complaints upheld against Money Advisor
A TV ad which ran in January received two complaints, centering on several assertions including the fact it could help write off 100 per cent of someone’s ‘unaffordable debt.’ Other claims included the fact they could provide debt advice although the firm is not regulated by the Financial Conduct Authority to do so and is instead a lead provider.
Another complaint challenged whether the use of the Money Advice Service name and logo in the TV ad misleadingly suggested an association with that service, which the standards authority upheld.
In its defence, Money Advisor confirmed that its business involved validating consumers’ details before passing them on to an insolvency practitioner. Clearcast said that it was common practice for companies to act as agents on behalf of others.
Asa upheld four out of the five complaints made against the firm, including its misleading use of the Money Advice Service (MAS) logo and five-star customer reviews on its website giving the appearance of linking the businesses.
In its ruling, Asa said the ad must not be shown again in the same form and Money Advisor was told to ensure its future marketing communications did not mislead by implying it was qualified to offer debt advice or help consumers write off debt among a raft of other stipulations.
Ying Tan to exit Dynamo after Connells Group buyout
Tan (pictured) leaves Dynamo after 15 years, during which he guided the business to a plethora of industry awards.
Tan said his mission when setting the business up was “to be respected by the clients and the marketplace as one of the leading mortgage intermediaries in the UK.” He feels this has certainly been achieved with his relentless drive for excellence.
He said: “Every entrepreneur dreams of starting, building, successfully scaling and exiting a business when the time is right; and this certainly represents the right time for me.”
“It’s been an amazing journey, having started from a tiny office in Guildford with no windows to operating out of a 13,000 sq ft office which has capacity for up to 200 people. Last month was a record revenue month for the business in our 15 year history. The Dynamo rebrand took us to a whole new level and the company is in a fantastic position to continue moving forward, at pace. It has a great new owner in Connells Group who has a proven track record with companies they have acquired and there are significant synergies which Dynamo will greatly benefit from.”
Tan said: “From a personal perspective this was too good an opportunity to turn down. It feels fantastic to leave the company in a strong position with records being broken and poised for continued growth having recruited aggressively since the beginning of the year. No one person is bigger than the business and I’m sure that it will continue to be a huge force in the intermediary market for many years to come. I’d like to thank everyone for their support over the years, the amazing staff and particularly my leadership team who have provided the backbone to the immense success of this wonderful business.”
Adrian Scott, Connells Group mortgage services director, said: “Dynamo has built an impressive reputation across the intermediary market and Ying has been the driving force behind this. He leaves the company operating at the top of its game and we are delighted to have been able to acquire it on the back of company records and with such a strong infrastructure in place for continued growth. The company is a great fit for Connells Group and I look forward to working with the strong Dynamo management team.
“I’d also like to take this opportunity to wish Ying well in his future endeavours and I’m sure he will continue to achieve phenomenal success in whatever he chooses to do next,” Scott added.