Owain Thomas rounds-up the debate which included the region’s vibrant new build market, the impact of Help to Buy on developer valuations and pricing, the arrival of new lenders and importantly, the end of tolls on the Severn Bridge.
Chris Shutrupps, managing director of The Mortgage Hut
Giacomo Stevens, sales manager at The Mortgage Hut
Alastair Mckee, managing director at One77 Mortgages
Christiaan Coolen, mortgage and protection adviser at One77 Mortgages
Dan Taylor, mortgage and protection adviser at BeAdvised Mortgage Solutions
Fiona Bolt, mortgage adviser at Vivid Financial Services
Steve Bolt, mortgage adviser at Vivid Financial Services
David Lenehan, mortgage specialist at Swindon Property Group
Jake Lewis, trainee mortgage advisor at Swindon Property Group
Neil Wyatt, head of intermediary distribution at Platform
Richard Daibell, national account manager – intermediaries at Platform
Colin Chandler, business development manager at Platform
Louise Gray, marketing specialist at Platform
Mortgage Solutions team:
Owain Thomas, features and contributing editor
Lisa Jayne Frankel, event coordinator
Venue: The private dining room, Hotel du Vin, Bristol city centre
With brokers attending from along the M4 corridor as well as Bristol itself, Help to Buy and new build has proved to be a key source of revenue and issues for all attendees.
“New build is still really buoyant from our perspective but anything second hand has died down quite a bit,” said one broker.
However, this was not the case with everyone as another broker noted that developers were finding it harder to predict which sites would sell and including offers to encourage buyers: “A site I looked at three years ago, the prices are exactly the same but now they’re throwing in stamp duty, carpets and legals.
“Also, maybe it’s a regional thing but we’ve seen an increase in shared ownership enquiries, but new build is definitely lower this year than last year,” the attendee added.
One point of unanimity around the table was the impact of Help to Buy on new build, with the agreement it had skewed the market, with developers extending prices beyond their natural levels.
“If you’ve got a first-time buyer with a small deposit they can buy a £250,000 second-hand property, but could buy brand new with Help to Buy at £325,000 or so. What are they going to do?” asked one broker.
With 60% to 80% of purchases on sites being Help to Buy for some developers, this prompted one broker to ask: “Does Help to Buy actually support an overpriced property market?”
It got a unanimous response – yes.
“I would say developers have perhaps inflated their prices to account for that extra 20% that buyers are getting from the government,” remarked one attendee.
“They work on the basis that unless they’re getting x% of down valuations, they’re not pushing the prices enough,” said one broker.
Another recounted how a developer had decided to push a property previously priced at £450,000 to £480,000 to “give it a try”.
And as developers have become “over-excited”, this has raised the spotlight on the valuations process.
“Some lenders still allow two valuations, which is great for us, but if you get a valuation done that should be the value the lender goes on, not ‘well we don’t like that valuation so we’ll go on the second valuation’. For us it works well, but as a lender, there’s surely an element of property risk.”
The Supper Club discussion took place with M&S Bank’s announcement of its entry into the mortgage market reverberating around the industry.
The big name caused quite a stir around the table with the general reflection being a warm welcome for another lender to offer more options and more products for customers – particularly as M&S will be embracing the intermediary market.
But what do these big names bring to the sector? Do they drive customers to brokers, or limit the willingness to choose a lender?
It turns out to be yet another chance for advisers doing their job successfully – advising.
“Clients are kind of blinded by what they want to do,” explained one broker.
“If they want to go with M&S because they know them, you still need to do the best thing for the customer, to educate them.”
Another added: “Our job is to explain that the brand they know maybe not the best for their circumstances. It’s all about an informed decision as to what they can borrow. That’s why we do our job as independent mortgage advisers. And we have to compete; we have to compete with the banks, we have to compete with the internet and we do.”
The next wave of change in the mortgage industry is already hitting home – digitisation.
It’s fair to say the future of the mortgage advice market is in the process of being formed in these changes.
“I think we’re defended in the sense that consumer buying behaviours have to change first,” suggested one broker.
However, there was an area of concern: “People like the current digital brokers probably aren’t the ones to worry about, it’s credit agencies, it’s lenders going direct,” the attendee noted.
“If people think that the algorithm won’t be clever enough, more fool you, because it’s already happening in other industries.”
But it is not only brokers being challenged by this new world.
Open Banking and the arrival of Application Programming Interfaces (APIs) integrating sourcing systems will bring change to lenders too.
“When lenders have the adviser feed directly in and we get instant decisions, then the conversation that we’re having right now will be completely different again,” noted one attendee.
“Because it won’t be speed, ease of system, whatever it may be that defines why we use a lender. Flipping it back at lenders, how do you differentiate yourself when you’ve all got the same playing field? It’s not a nine-day, 12-day, 15-day speed to offer; it’s an instant offer.”
Fantastic for landlords
The debate wrapped up examining the local markets and one of the big macro changes affecting the whole region.
Variations among the areas represented were strongly apparent. For example, brokers based in Bristol noted that business had flattened out, with the buy-to-let market “dropping off the side of a cliff”.
In contrast, 40 miles down the M4 in Swindon the buy-to-let sector has remained “pretty strong” while residential sales and prices have “really dropped off”.
But the real talking point involves an international border, of sorts. While most of the UK is occupied with Brexit, the Severn Bridge and its impending cessation of tolls is generating plenty of interest in these parts.
“In the past I had a job offer to work in Cardiff and I didn’t because of the commute. While it will probably be more the other way in Newport, Cardiff and other areas coming to Bristol, there is scope for people in Bristol and the surrounding areas to drive into Wales,” explained one broker
Another added: “Once the bridge tolls have gone, Newport’s property market is going to really go up. I’ve got someone buying a four-bed bungalow there at the moment for £125,000. So it will go up, it’s going to be fantastic for buy-to-let landlords,” says one broker.
While rural areas will also likely see their markets overhauled: “I’ve got customers who have bought properties in the Forest of Dean and once those tolls have gone, those prices are so cheap,” concluded a third attendee.