TML’s Beaumont warns mortgage market must ‘wake up to scale’ of work ahead of Libor changeover – analysis

TML’s Beaumont warns mortgage market must ‘wake up to scale’ of work ahead of Libor changeover – analysis



This gives lenders just under three months to make a decision on which changeover rate to commit to on two-year loans for new mortgage customers.

Speaking to Mortgage Solutions, Beaumont, deputy CEO at TML, warned there may be lenders who have not woken up to the ‘scale of the problem’ suggesting this is potentially a dangerous place to be.

“The message is really clear.  The Financial Conduct Authority (FCA) says stop issuing Libor contracts as soon as you can, get on to alternatives, minimise the size of the problem and make sure you’ve got a cohesive executive-led transition plan for your existing borrowers,” he said.

The FCA confirmed it had already engaged directly with the six smaller mortgage lenders issuing Libor mortgages back in 2018, adding: “We strongly encourage mortgage lenders, intermediaries and mortgage borrowers to avoid new mortgage contracts that rely on Libor continuing beyond end-2021.”

Beaumont said in TML’s discussions with the FCA it explained how central mortgage brokers will be to the changeover.

“We’re issuing contracts but they’re recommending the advice to the customer. So, they’re the ones that need to follow the reasons for doing this.

“We want to be able to start educating the advice community on this change. Brokers are going to be issuing or recommending contracts to customers, whatever that may be. There’s a huge education piece here,” he added.

Specialist mortgage lender TML said its transition plans were well advanced and underway for both new and existing customers.

Alternative risk free rates being considered by the industry include Bank Base Rate, Standard Variable Rate and Sterling Overnight Index Average (Sonia), currently the working group’s preferred rate.

The Sonia benchmark is based on actual transactions and reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions.


Mortgage industry impact

FCA figures suggest there are an estimated 200,000 or £30bn of Libor-linked mortgages outstanding in the UK, with four lenders – Foundation Home loans, Pepper Money, Kensington and The Mortgage Lender still offering new customers Libor-linked mortgages, according to a Moneyfacts listing.

Precise Mortgages stopped offering Libor-linked mortgages to new customers in July, swapping to Bank Base Rate (BBR)-linked home loans and is continuing to work toward a benchmark for existing customers.

Alan Cleary, managing director at Precise Mortgages said: “When it becomes clear what index the industry is to settle on we will make our decision. The terms and conditions in our mortgage contracts allow us to use a suitable alternative index in the event of the withdrawal of Libor.”

Precise ran a 12-month project before making its decision and the move to BBR. It considered direct alternatives to Libor, including Sonia, but said despite assessing Standard Variable Rate, BBR ‘fitted its proposition better.’

Cleary said as the changeover only involved new customers, its customer communication strategy has so far involved a change to the European Standardised Information Sheet (ESIS) document and general mortgage conditions.

“We didn’t do any specific communication on this change, it simply wasn’t necessary given how well known this index is. When we move our back book to a replacement rate for Libor, we will communicate the details to our customers directly,” said Cleary.

Brokers already understand BBR and SVRs, he added, so the lender is not planning any further targeted education at this point.


No confirmation yet

The other lenders, Foundation Home Loans, Kensington Mortgages, Pepper Money UK and TML have not confirmed a decision and continue to consult on next steps for new and existing customers.

However, all recent and new securitisations have been linked to the Sonia daily rate.

Jeff Knight, marketing director at Foundation Home Loans said Sonia has replaced the three-month Libor and its funding documentation has always incorporated Libor replacement language as has its mortgage documentation since 1998.

Knight explained: “As yet there has been no guidance from the FCA around replacement measures for mortgages and it is complicated by Sonia being a daily measure, whereas most mortgages are monthly.

“There needs to be transparency around how the rate is set and the current methodology which is an interpolated retrospective rate, so too complex for consumer use. Consequently, we are waiting for the FCA to advise on what needs to be a market-wide move away from Libor.”

Alex Maddox, capital markets director, Kensington Mortgages, said it has been working ‘hard’ on its preparations but that he expects the securitisation markets to be Sonia-linked as standard from now on.

The lender’s latest July-launched Finsbury Square 2019-2 residential mortgage backed securitisation was its first securitisation linked to Sonia.

He said: “The deal saw very strong demand with a number of investors saying they are reticent to buy deals linked to Libor.”

Maddox added that Kensington is due to make a decision imminently on its benchmark rate for its mortgages and will be in touch with brokers as soon after the decision as it can.

“We have undertaken an extensive review of the terms and conditions of the almost £6bn of loans that we have to existing customers and will communicate to those customers about what changes will need to be made to their loans and when that will take place. Our key focus is to make sure that the rate change is fair for customers and clearly communicated.”

Pepper Money UK said it has already set up its own working group to closely follow industry developments and written to customers to explain that alternatives to Libor are being explored.

Paul Adams sales director for Pepper Money UK, said: “We are currently exploring the different options available to us, for example our recent securitisation; Polaris 2019-1 was structured using Sonia in preparation for the end of Libor-based transactions.”


Industry progress

Edwin Schooling Latter, the FCA’s director of markets and wholesale policy, said: “The key to this is that the end of Libor should not result in mortgage customers being transferred to other reference rates that are expected to be less favourable to the customer than Libor would have been.”

Latter suggested mortgage prisoners are unlikely to suffer detriment from the changeover because Sonia may offer less volatility in the medium to-longer term because it does not reflect the lenders’ costs of unsecured borrowing in wholesale markets, unlike Libor.

However, he added: “Some mortgage lenders may prefer to reference the Bank Base Rate directly rather than Sonia because it is well understood by consumers, and already used in some floating rate mortgages.”

UK Finance director of mortgages Jackie Bennett said the key consideration for firms is acting in their customers’ best interests and ensuring that any changes made are fair to customers.

Bennett added: “In the UK, coordination of the process is being led by the Bank of England’s working group on sterling risk-free reference rates. The working group is reporting good early progress in derivatives market adoption of Sonia as a replacement for Libor and is looking to promote similar progress with respect to other product types.

She added the mortgage lender trade body is working closely with members to understand any communication challenges they face: “We will continue to monitor messages from the regulators and developments in adoption of Sonia across other market users.”

One of the challenges for the industry is that closed book lenders which often sit in an unregulated space outside of FCA supervision, and so outside of working group efforts, may not be as supported as other mortgage lenders.

But the immediate mortgage market-related focus is on the small to medium enterprise and retail space driven by trade bodies and the regulator.

The Bank of England (BoE) through its steering group, Dear CEO work, publication of best practices, speeches and industry outreach continues to encourage consultation, debate and offer the industry support as a priority for Q4 and into 2020.

Commentators suggest the BoE is working with trade bodies to get mortgage lenders to move in a ‘peleton’ formation given the benefits of agreement and is encouraging all lenders to be involved in the UK industry group consultations. However, lenders will be left to make their own decisions with regulators loath to stray into anti-competitive waters.

And time is ticking down.


The Top 10 mortgage broker stories this week ‒ 30/08/19

The Top 10 mortgage broker stories this week ‒ 30/08/19


Leeds Building Society launched a 10-year fix, which topped our most read this week, followed by the government’s changes to the Help to Buy and shared home ownership schemes, allowing borrowers to take out schemes for longer than 25-years.

Opposition leader Jeremy Corbyn also called for a levy on second homes in the capital given the ‘offensive’ number of empty investment homes and the housing shortages, which drew plenty of attention.

Review the week’s biggest-hitting stories with us.


Leeds BS introduces 10-year fixes for buy to let


Government overhauls Help to Buy and shared ownership to support buyers


Corbyn calls for second home levy to tackle ‘offensive’ housing issues


Interest-only on rise again making repayment strategy key – Bartle


London brokers launch adviser firm targeting Brexit opportunity


Insights into mortgage lender debt to income ratios – Mortgage Broker Tools


Natwest and Royal Bank of Scotland suffer major system outage


Advisers warned to ‘sit up and take notice’ of incoming SM&CR regulations – Accord podcast


Surveyors risk creating next wave of mortgage prisoners through ‘black and white’ approach to high-rise cladding


The LSL interview with Toni Smith and Jon Round from Primis


July mortgage house purchase approvals hit two-year high

July mortgage house purchase approvals hit two-year high


However positive the figures, this remains within a narrow range as the annual growth rate also stayed at 3.2 per cent, which is close to 2016 levels, according to the Bank of England’s Money and Credit report.

The central bank also announced that gross mortgage lending for July was down to £21.4bn – the lowest for two years.

The figure was a drop from £21.6bn in June, continuing a slide over the last four months from £22.4bn in April.

The reports are used by the BoE’s policy committees to understand economic trends and developments in the banking system.

Net consumer credit rose by £0.9bn in July, broadly in line with the average seen over the past year and the annual growth rate of consumer credit remained at 5.5 per cent in July, markedly down from the 10.9 per cent high of November 2016.

Within the July figure, the extra amount borrowed for other loans and advances fell on the month to £0.6bn, while net credit card borrowing remained stable.


Steady as she goes

Commentators across the market celebrated the resilience and stability of the mortgage lending and advice markets despite the political upheaval.

Kate Davies, executive director of the Intermediary Mortgage Lenders Association, said: “The mortgage market clearly remains in a strong position despite turbulent times in Westminster. IMLA’s research has shown that borrowers’ appetite for finance continues to grow – completion rates are on the rise and intermediaries’ confidence in the market remains strong.”

“Ongoing political uncertainty is undoubtedly on the minds of people looking to step onto or up the housing ladder, but advisers are playing an important role supporting these borrowers,” she said.

Danny Belton, head of lender relationships, Legal & General Mortgage Club said: “Innovation from lenders is helping to provide the solutions for borrowers to join and climb the property ladder, while competition in the sector means that there are some great opportunities and deals available for those looking to buy or remortgage.”

Richard Pike, sales and marketing director at Phoebus Software, said the Bank of England’s latest figures, alongside Land Registry data confirming a 15.3 per cent increase in homes sold shows a healthier market now than at the beginning of the year.

But, he cautioned: “We do have to ask whether this particular turnaround is as a result of the uncertainty of what may happen after October 31 when the UK leaves the EU? It is only natural that people are looking to the future and wondering how the market will fare post-Brexit.”


Home buyer and seller activity ramps up driven by fear ahead of Brexit deadline

Home buyer and seller activity ramps up driven by fear ahead of Brexit deadline


An index from the National Association of Estate Agents (NAEA) suggested the number of potential buyers registering with agents rose, as the supply of available housing also increased from 37 at each branch to 41.

The number of house hunters registered per estate agent branch also increased in July, from 305 to 316.

Despite there usually being a summer lull, the number of sales agreed per member branch remained at nine in July, the same level for the third month running.

Sales to first-time buyers also increased from 23 per cent in June to 26 per cent in July, although this still represents a year-on-year fall of four per cent, down from 30 per cent.

Mark Hayward, chief executive, NAEA Propertymark, said: “The summer is typically a quieter period as house buyers and sellers put their plans on hold with housing market activity stalling as a result.

“However, this has not been the case this year. Buyers can only delay the need to move for so long and we’re now seeing buyers storm the market hoping to complete transactions before the end of October.”

The NAEA survey is drawn from 12,000 estate agency offices in the UK.


The LSL interview with Toni Smith and Jon Round from Primis

The LSL interview with Toni Smith and Jon Round from Primis



In February this year, Primis and Personal Touch Financial Services (PTFS), appointed representative networks of LSL Property Services,  came together under the Primis brand.

Since LSL acquired PTFS and its 2,300 registered individuals (RIs), the firms have undergone significant alignment, including integrating sales, operational and proposition functions under a single executive team.

Primis COO Toni Smith said the brand is rolling out the Toolbox technology, the PTFS operating platform, to the rest of the network and completed 200 training events for 3,000 RIs, which ran over 14 weeks from May this year.

At the time of writing, Smith said there are 187 applications to join the network from RIs, with plenty of multiple broker firms in the mix.

The figures


The group’s annual mortgage completion figures, reported in March this year, jumped from £21bn to £29bn for 2018. This was a total market share of eight per cent, which has already risen in its H1 results.

LSL’s financial services brands include network Primis, formerly trading as First Complete, Pink Home Loans (Advance Mortgage Funding) and Personal Touch Financial Services, mortgage club The Mortgage Alliance (TMA) and Embrace Financial services, an appointed representative of First Complete. Other brands include Linear Financial Solutions, Mortgages First and RSC New Homes, First2Protect insurance services and Mortgage Gym.

LSL’s first-half results this year confirmed the group’s share of the UK mortgage market is at 8.5 per cent. It also secured a 10 per cent increase in the group’s protection completions in H1 and a seven per cent rise in general insurance completions.

UK Finance product transfer data for Q2 out last week showed 292,500 homeowners switched product with their existing provider, with 164,100 on an advised basis representing £41.4bn of mortgage completions.

Last year, almost 1.2m people took a product transfer with their existing lender worth £158.7bn of lending activity, around double the figure for remortgages.

LSL reported its product transfer business in H1 this year at £4.2bn, or 28 per cent of the group’s total mortgage completions which were £14.7bn. This represents an 8.5 per cent share of the UK mortgage market.

The network currently has 860 broker firms in its network and says: “We understand that Primis is the largest network by mortgage volume as confirmed by most of our lender partners.”


The strategy

“We would always claim one of our unique selling points is the mutual benefit to the people joining us and the business. It’s a triangular effect – 184 events this year – the market, the proposition, what’s in your kitbag, challenging brokers to do a proper job every single time you sit down with a customer,” says Smith.

She adds that cascading product and technology knowledge and teaching businesses how to run a business are key strands of Primis’ purpose.

“Great brokers are not necessarily great business people,” adds Smith.


Primis CEO Jon Round (pictured) said: “We have historically worked with Twenty7Tec. I think that’s the software most of our brokers will be using moving forward. It’s the closest connection and the strongest software.”

He suggests that choices of sourcing system available in the market will narrow over time.

He adds: “You’ll probably have multiple solutions for a while. It will take time for lender systems to connect up [to distributors]. Lenders will want to try to connect with most of the larger distribution groups but they may not have the capability. They have the same issues many of the networks have that they will have to wait to be connected up by their software provider.”

Smith adds that the group will be ready to showcase its software in September and its initial Application Programming Interfaces (API).

In September last year, LSL entered a partnership with MortgageGym, which is an automated advice and artificial intelligence services firm, valued at £12m, which also only launched last year.

Regulated by the Financial Conduct Authority, MortgageGym offers a free 60-second mortgage-matcher and mortgage advice, which includes full integration with Experian credit files and mortgage lenders’ live scorecards.

Round says: “Our plans with Mortgage Gym further demonstrate our commitment to investing in technology for our members. Mortgage Gym will allow our brokers to place cases more quickly and easily, encompassing the whole point of technology in the mortgage market – to support the human aspect of the application process.

“We look forward to working with the team at Mortgage Gym to help more brokers embrace the technology that’s out there and produce the best possible outcomes for their clients.”

He adds: “If you go back three or four years, the discussion with the broker was all about what system or platform a network has and the technology was more the domain of the administrator. Now when you think about which network to join it’s all about tech offering and asking how it’s going to grow your business.

“If you can’t show the platform in place and how you’re going to keep pace, you can’t compete,” he adds.

Market projections

I ask Round and Smith if the advisory market has peaked in terms of business volumes given the momentum being created by product transfers and execution-only regulation.

Round said: “Unless regulatory change drives it in another direction, I can’t think why people would look for less choice.

“The mortgage journey is never going to be simplified back to its unregulated status, to a few tick boxes. It’s always going to have rules and compliance and be complicated to an extent and so you’re really going to want to talk to someone about that.

“To go and just have a conversation with one lender, why would you do that? Some have fantastic digital propositions – but are they getting traction? No, they’re really not.”


The outlook


Round suggests that the broker models that will work will be extremely well diversified, with a polished proposition aligned with better technology tools – the bionic broker model.

He continues that later life lending still needs plenty of product flexibility to create truly inter-generational products that can qualify a mortgage through the generations passing property title from one tier to another without a property sale and the advice to go with it.

“It’ll get there,” he adds.

Round says this market never sits still, which is why it remains exciting.

“That’s good because we’re competitive and you can be nimble and win but it does constantly mean you have to keep thinking. Its that sort of vibrancy. It’s a fascinating market.”

London brokers launch adviser firm targeting Brexit opportunity

London brokers launch adviser firm targeting Brexit opportunity


The City-based mortgage and insurance brokerage will launch in September and the directors are keen to attract residential, buy-to-let, refurbishment and bridging mortgage customers.

The adviser firm will be headed up by Antonio Michael (pictured) with Oliver Hines-Lloyd serving as director.

Michael’s C.V includes time as head of private office at Enness,, John Charcol and Countrywide, while Hines-Lloyd has served at Enness and deVere Group.

The firm is looking for a typical loan size of £500,000, according to reports, and referrals from industry professionals including estate agents, solicitors, tax advisers, and accountants.

The broker is looking to charge a fee of 0.65 per cent per transaction and Michael said: “I decided to launch Articus Finance to focus on residential and bridging finance.

“We feel the need for bridging finance will increase over the next year given the political uncertainty and this is where my knowledge and relationships with key lenders will allow me to act fast for our clients.”


The top 10 mortgage broker stories this week – 23/08/19

The top 10 mortgage broker stories this week – 23/08/19


Next up, the fact comparison sites are leading to high decline levels is hardly shocking to many in our industry but Experian figures confirmed it this week and broker Christopher Hall’s Simplybiz revelations also went down a storm with readers.

Review the week’s biggest hitting stories on Mortgage Solutions…and have a cracking bank holiday weekend.


Boris Johnson’s signals on rental sector and stamp duty are good news – Young


Lenders decline a third of customers using comparison sites – Experian


Exclusive: Broker slams SimplyBiz for trying to poach advisers from departed firm


When conveyancing goes wrong: The £200k sent to a client instead of a lender – Syms


John Charcol to refer equity release deals to Key Partnerships


Javid rejects moving stamp duty liability from buyers to sellers


Ex-broker firm boss Matt Lowndes to step into senior MAB technology role – exclusive

Estate agent jailed after pocketing deposits


Grenville Turner joins Yopa as firm attracts £16m from Daily Mail and Savills

‘The big lenders are very hot’ on deal-end communication – Marketwatch



Product transfer popularity increases in Q2 with majority advised – UK Finance

Product transfer popularity increases in Q2 with majority advised – UK Finance


The Q2 PT figures show 292,500 homeowners switched product with their existing provider, with 164,100 on an advised basis and 128,400 through execution-only.

By value, internal product switching represented £41.4bn of mortgage borrowing, which is an increase of 16.3 per cent year-on-year. That divides into £24.4bn on an advised basis, and £17bn execution-only.

UK Finance data for the first three months of 2019 recorded a total of 116,030 remortgages, worth £20.7bn, completed either as pound-for-pound remortgages or with further equity taken out.


The trajectory

Last year, almost 1.2m people took a product transfer with their existing lender worth £158.7bn of lending activity, around double the figure for remortgages.

These figures are not included in UK Finance mortgage market data for gross lending or remortgaging.

However, the intermediary industry continues to examine these figures closely to understand whether product transfers are revenue generators or revenue detractors from the overall intermediated remortgage market with the result too close to call so far.


Grenville Turner joins Yopa as firm attracts £16m from Daily Mail and Savills

Grenville Turner joins Yopa as firm attracts £16m from Daily Mail and Savills

The latest funding round drew investors from the venture capital arm of the Daily Mail Group and Grosvenor Ventures, the investment arm of Savills, alongside Yopa founder Alistair Barclay, according to an exclusive in Property Industry Eye.

LSL, parent company of Your Move and Reeds Rains, is an existing investor but has not contributed to the latest funding round.

Ben Poytner, CEO of Yopa, said: “This latest funding round from existing backers is a clear recognition of Yopa’s significant growth potential.”

He added: “We are pleased that Grenville Turner has agreed to join the board to support the business as it continues to mature.”


Turner’s C.V


Turner retired from Countrywide after two years as chairman in April 2016 after joining the property giant in 2006 and becoming group chief executive in 2007.

He oversaw the company’s stock market flotation in 2013 and at the time of the announcement, the firm was valued at around £750m with an initial share price of 350p.

Yopa’s published Companies House accounts show losses of £32m in the 12 months to the 2017 year-end. However Turner is confident the business will be profit-making suggesting “sophisticated” investors understand that “a lot of money is required for start-ups” as they build teams and brand awareness.

Prospects for estate agency


Later in the Property Industry Eye interview, Turner says the well documented struggles of other online agents – including Hatched which closed and Purple Bricks, which has been forced to withdraw from the US after two years following the driving expansion achieved mounting losses – shows market consolidation.

He said: “You are usually left with two or three players of scale, and my view is that in the hybrid agency sector, Yopa will be one of them.”

He does not think that the high street sector is doomed, but he does think it has changed: “High street offices are no longer places where people transact or even visit very much. They have become high street billboards.

“That is not a criticism – so long as the costs are appropriate. I do think that the high street will have a very long tail.

“However, I subscribe to the belief that people over-estimate the amount of change within two years, and under-estimate it over ten years.

“I think we are now in our third or fourth year of that change.”

He added that Yopa will also be launching its own mortgage services ‘shortly,’ but will continue to outsource its conveyancing.

Former Santander marketing boss Murley joins award-winning equity release broker

Former Santander marketing boss Murley joins award-winning equity release broker


Her brief will include looking after equity release and later life clients on the South coast and pursuing her membership of the Equity Release Council standards board.

Viva has won the Best Financial Adviser – five advisers or fewer award at the Equity Release Awards for the last four years and won a British Mortgage Award this year.

Murley was an adviser at Dorset-based Apex CB Financial Planning for two years after running a compliance and risk assessment consultancy practice following several years as head of insurance and sales marketing at Santander.

Murley said: “I am excited to be joining the team at Viva Retirement Solutions to build upon a successful two years advising clients across Dorset with their mortgage requirements in later life.

“This presents an opportunity for me to join a national independent firm with a recognised reputation across the industry. As the sector continues to grow and move towards mainstream, I hope to use my position on the ER Standards Board and my 40 years’ experience in financial services to support the team at Viva in achieving their continued growth.”

Viva director Mark Lambert, said: “We are very pleased to have Liz on board and her appointment only strengthens the best advice offering for our clients in this growing market. We fully support Liz’s role with the Equity Release Council and are delighted to able to offer face to face advice on the South Coast through Liz”.

Viva has plans to grow its business and adviser numbers and is an Appointed Representative of network Stonebridge.