1) Ben Riley, director, First Mortgage North East
2) Philip Maguire, director, First Mortgage North East
3) Steve Easter, sales director, Fairstone Group
4) Paul Hampton, director, Approved Mortgage Solutions
5) Mark Fenton, director, Fenton Simpson Financial Services
6) Brian Dowling, director, Quay Solution Financial Management
7) Joanne Manghan, mortgage adviser, Hanson Financial Partners
8) Toby Ireson, Newcastle sales manager, London & Country Mortgages
9) Duncan Train, mortgage adviser, Stan Sherlock Associates
10) Tony Lenderyou, principal, Tony Lenderyou Mortgages
Accord Mortgages team
Chris Sanderson, regional sales manager – north, Accord Mortgages
Malcolm Trewick, BDM, Accord Mortgages
Charlotte Hird, media relations officer, Accord Mortgages
Mortgage Solutions team
Victoria Hartley, group editor, Mortgage Solutions (chair)
Oonagh Sheehan, commercial manager, Mortgage Solutions
Lisa Frankel, event co-ordinator, Mortgage Solutions
Venue: The private dining room, 21, Newcastle, Quayside
The glittering lights of Newcastle’s Quayside were the stunning backdrop to the night’s Supper Club event with plenty of the regional stars of the intermediary world gathered for just one night only.
After a drink or two, Chris Sanderson, Accord’s regional sales manager for the north welcomed the invite-only guests and handed over to the evening’s chair, Victoria Hartley, group editor at Mortgage Solutions.
On the unique character of the Newcastle market, our guests agreed its most notable feature is affordable city centre housing with plenty of first-time buyers easily qualifying for 95% loan to value mortgages. However, brokers said elsewhere in the north east, some first-time buyers, still aware that affordability may bite later on, are raising their sights and buying what would traditionally be considered second time townhouse homes, often with government scheme assistance. The knock-on effect of this was lack of demand for traditional first-time buyer properties like terraces and flats with many of these sellers looking to let to buy because they can’t sell or get the prices they want for their property. But the Treasury’s and Prudential Regulatory Authority’s market interventions on everything from Stamp Duty, to loan to income caps and tighter underwriting have meant let to buy is becoming harder all the time for borrowers to secure, like buy to let.
One broker said: “This has been a problem for a few years but I think it’s magnified as an issue since the tax changes of last year. And I think we’ll see the real implications of that over the next two or three years as they really kick in.”
Another broker used the student-heavy town of York as an example of how the stress test changes are tying landlords’ hands. “House prices have probably gone up 40% in the last five years, so plenty of people have equity in their properties and plenty of people have gone the let to buy route as York’s got a university, two universities in fact – and it’s fairly easy to rent the property out.
“But now, all of a sudden, to be able to get that extra £40,000, £50,000 out of that house to be able to move on to buying another residential property, the stress test rates just don’t work out.”
The broker said this could remove an estimated 10% to 15% of prospective landlords from the market overnight in York alone.
Another broker said when it came to pound for pound remortgages, despite the Prudential Regulatory Authority’s (PRA) assurances that applying the old affordability tests is acceptable practice, just three lenders – Leeds Building Society, Virgin Money and Nottingham Building Society – are offering them without the full income assessment. (at February 2017)
Debate chair Victoria Hartley asked how much capital-raising attendees saw from buy-to-let landlords in the north east.
One attendee said: “You don’t tend to have the capital growth to make it justifiable on a two or three-year product. If you [take] another case after another broker, lesser broker, you’ve added £1,000 worth of fees, which is a year’s worth of capital growth. So there’s not the money to take out in the northeast that you get in other parts of the country.”
Few of the brokers were enthusiastic about the prospect of directing more clients towards five-year fixed rate mortgages, despite the gentler affordability assessment, and others said buy-to-let borrowers are considering a five-year loan if it’s the only option available. Another said few are willing to commit to a five-year loan because they want to see how the tax changes will ultimately affect them.
One broker mused: “I think when you read the PRA consultation paper, it’s a bid to introduce ethical sustainable lending to [buy to letters], and is not that much to do with slowing the market down, because it applies to remortgages as well. If it was purely and simply to slow the market down, it would be in that purchase. But it’s not, it covers remortgage and purchase. So I think it is to add an extra layer of ethics, if you like, to buy to let, rather than to just slow the sector.”
Next, the discussion turned to lenders and those who used Office of National Statistics (ONS) figures to underpin affordability calculations, which one broker suggested was out of step with lifestyle realities in the north east.
The broker said if a borrower has two children, the lender will deduct £500 from affordability to cover childcare costs, where in fact parents and grandparents are looking after the kids for free.
The broker said: “As soon as you use an affordability calculator, you can see in the background whether they’re using ONS figures or whether they’re using the figures you’ve actually put into the calculator.
“You tend to find the smaller building societies don’t use the ONS figures so with [lenders] like Principality, you can borrow sometimes upwards of five times income because they’re using the figures that you actually put in that you can justify from a bank statement.”
The broker said the difference between the real figures and ONS is a 20% drop in affordability.
“If you’ve only got one income but you’ve got a dependent child, and you’ve got a car loan, you’re knackered,” he added.
The top UK lenders
Meanwhile, the brokers were asked which UK lenders are topping their leader boards or outperforming against the pack – and the smaller building societies appear to have plenty of fans.
One adviser listed Principality, The Nottingham, Furness and Darlington building societies, whereas another said NatWest/RBS took a massive chunk of his business partly because its underwriters did not use ONS figures and also because of its flexibility on income. Another mortgage adviser said he liked Santander because its products are ‘strong, they do interest-only and it does five times income multiples.’
Accord was commended for the strides it has taken in improving processing speeds down from 15 to 20 days last year to 11 days in January and another broker said its greater clarity in terms of underwriting makes a difference. The lender admitted it was mildly constrained by its systems currently, but that working with a business development manager and discussing the case, subject to credit score, is the way to grab a case by the scruff of the neck.
Accord’s sales manager for the north, Sanderson also asked the brokers what they thought of the cafetiere it began sending out to borrowers on completion on their behalf at the end of last year for those who were involved in the pilot scheme. The scheme has since been widened and the lender has started sending weekly emails to let brokers know which customers have been sent a cafetiere on completion.
As the debate headed toward a close, Sanderson was grilled over how and when the lender planned to extend the retention proc fee pilot and the lender’s approach to the valuation linked to the product transfer.
The lender broadened its retention procuration fee pilot in February to more brokers to coincide with a significant maturity period and expects to roll the 0.3% fee out to the whole of the market this year.
He added that the lender was always reviewing its own approach and confirmed its plans to enter the consumer buy-to-let market by the end of May 2017.
And finally, given that mortgage adviser numbers continue to rise, largely due to apprenticeship schemes and the work mortgage advice firms are doing to recruit new blood into the industry, Mortgage Solutions asked the top advisers in the north east around the table for their best tips for a successful career.
Here are some of their replies:
“Surround yourself with experience, because even after two years you are still serving an apprenticeship.”
“Don’t let it get you down.” (to laughter)
“Every time you try and place a case, looking back, making note of where you placed it, a little book of it so you remember because I’m probably guilty of resourcing the same deal several times over.”
“Go back to your clients every year, whether they want you to or not, and check in. That way, they’re going to ring you first.”
“Use your BDMs. I can’t believe that a new broker would come in, maybe working for an estate agent, as you did years ago, and not ring up every lender and ask the BDM to come in and see them. You’d be amazed at how many new starters just use them when there’s a problem.”
“We do a good job for people and people trust us to do a good job. And I think if anybody’s new coming into it, don’t chase, don’t try to become a millionaire, just make sure you do the job right and you will get a good living out of this business.”
“Share best practice. If you look round the room, it’s the same faces at these events for the last 10 years. And I would think nothing of picking the phone up and asking any of you about a case if I couldn’t place it.”
With thanks to all our guests and our sponsors, Accord Mortgages