In a private room, which closed out the hubbub from the well-heeled families in the restaurant, we brought together some of the key broker firms and lender Accord Mortgages for an advice market focused debate driven by Mortgage Solutions headlines and the market at-large.
Our discussions revealed Colchester and its surrounding area is a hive of new-build activity so the government’s Help to Buy scheme is, and has been, a plentiful source of business.
As such, the 2020 scheme-end date is fast-approaching, but one of the brokers, who wouldn’t be drawn on which firms, said builders are already looking at creating their own equivalent schemes.
New build and Help To Buy
One broker said the government was unlikely to let the new build market fall flat as it had too many ‘quotas to fulfil’ and added that some lenders were already stepping up to the plate like Kensington and Halifax who were willing to accept 95% LTV on new build.
“I think without Help to Buy, new build is going to look very expensive very quickly,” said another broker.
An attendee suggested Help to Buy could catch out borrowers in an affordability quagmire similar of sorts to the deferred interest mortgages sold in the 1980s, which relied on rising incomes and property prices and disastrously caught many out.
Many of the participants around the table agreed some low-income Help to Buy borrowers may struggle to remortgage away from the 20% equity loan when they have children or need to move later on.
Another participant admitted he had talked low-income clients out of Help to Buy.
“I don’t think anyone buying Help to Buy expects to pay [the equity loan] back after five years. They go into it just thinking to themselves, I’ll get into it, I’ll get the keys and I’ll work that one out later,” added another broker.
“That’s the problem. There is no exit strategy. That is my worry,” said another.
“They’ll be fine as long as long as house prices keep going up,” added another.
Another participant said his firm does a lot of Help to Buy remortgaging and buyers five years ago have sufficient equity, but he questioned the next five years, particularly in places suffering price falls like the capital.
“I’ve got some London Help to Buys going through and the equity loan is £240,000 and if you think the London market is probably going to be hit, well, I don’t know but the consensus would say that that’s going to be harder. I’m quite worried about those.”
“In five year’s time, 1.75% on a £240,000 equity loan is still quite a big increase on top of their normal big chunk,” he added.
The digital world
In May, the first digital adviser Trussell attracted investment of £13.6m from a raft of investors including Goldman Sachs into what is essentially a mortgage broking company in North London with roughly 20 advisers and around 70 employees.
On paper, despite a substantial technology department, the firm has plenty in common with any other mortgage brokerage.
So chair, Victoria Hartley, group editor at Mortgage Solutions asked the guests what, if any, new technologies they had invested in, their interest in representing themselves as a digital broker and the difference it was making to clients.
One or two attendees were refreshing websites and adding consumer dashboards allowing document uploads and a digital fact find – but one broker was clear he never wants to be labelled a digital adviser.
“It’s horses for courses. It’s just having the choice. If you’ve got the option, you are going to get potentially a bigger share because some people will want it, some people won’t.”
Another broker advocated Smartsearch, which on telephone cases, verifies the customer’s identity compliantly and returns a pass which is attached to the case with no document exchange, although if the lender requires it, that still needs to happen.
Lender heroes and villains
Mortgage lenders name-checked for ‘knocking it out of the park’ on service included Accord Mortgages, Halifax Intermediaries, Virgin Money, NatWest, Nationwide and Santander.
“I like Halifax, I like the overall system and the initial phone call to do the first checks, for speed in the right case. I’ve had cases offer within four days,” said one broker, adding that often, on straightforward cases within 10 minutes of submission Halifax calls to verify income.
Chris Sanderson, sales manager for the East at Accord said all their cases should receive a welcome call from the underwriter, and the guests confirmed how important it was to have a verbal confirmation from the person authorising the loan that the case looked good to go.
Nationwide wins an ‘awful lot of favours’ said another broker because an underwriter calls on any case issues, flags if it’s a yes or a no and tells you when the offer will be available, ‘which is a fantastic service’. NatWest and Virgin do something similar, said others.
So what do brokers want from lenders?
“What I want is an underwriter who is looking at reasons to support the decision to lend rather than reasons to turn a case down. And I think there’s a really big difference in that attitude. If you look at something hard enough and long enough for a reason not to do it, you’ll find it,” said one broker.
Another broker said that the job on the front line for complex cases is about presenting the narrative of a case with all its oddities and explaining how the client arrived at this point to build up a positive picture.
The digital future
The debate turned to the shape of the market, distribution and the potentially changing dynamic of lead generation and customer-flow in the mortgage market. The conversation surrounded the two-tier nature of cases – simple or vanilla and complex – and the appetite lenders may have to deal with those two tiers in future.
One broker suggested the credit, banking and general information sharing ushered in by the Open Banking era would allow mortgage lenders to bid for mortgage cases in an Ebay-like fashion to offer rates on a single digital platform, either via brokers or direct to consumer.
But, Accord’s Sanderson asked if the brokers thought digital advisers were a threat? One guest flipped the question and asked how appealing this business is to lenders, because if it appeals to lenders, it’s a threat.
He added digital advisers like Trussell, Habito and Dynamo could appeal to high street volume mortgage lenders chasing market share when coupled with links to Application Programming Interfaces (APIs).
Digital advisers which just tended to recommend the best rates in the market to vanilla clients could be valuable enough to offer massive market share to best rate lenders on cases which don’t even need to touch the sides.
“Lenders will probably pay lower proc fees and even dual price for those brokers with a better rate, but it’s about whether you want to take the market in that direction and put all your eggs in that one basket.”
He said, as with Smartphones, we have all headed down a path but we have no idea if the outcomes are going to be good or bad before we all committed to that path.
The same adviser said, if a broker promised a lender pretty much all their business, the lender with its lending targets is unlikely to turn its back on that.
Accord’s Sanderson said: “We do also look at the flipside of it. If people are sending us too much business and too much market share, it won’t play that well..”
On fee charging, one guest said: “How much interaction does the client actually want? So if you want a face-to-face contact, if you want us to come out at 8pm at night to see you in your little cul-de-sac round the corner, then yes, that’s eating into our personal time as well.
“We’ve all got lives, we’ve all got families. So, I think that’s where you can probably justify charging,” he said.
Finally, another broker said: “We have been archaic in the way that we’ve done things, in terms of being able to transact with people at a time and a place that suits. 24/7, I get that. So, let’s make ourselves better at that bit, but still give advice.”
“But lenders, will continue to hold the key to the sustainability of broker’s jobs in this market,” he added.
And although the formal discussion wrapped at this point, our guests carried on discussing the fact the future of distribution is at a crossroads with plenty to win and lose in either direction.
With thanks to all our guests on the night.
Colchester Supper Club Attendees
John Pollard Needham Mortgage Centre
Carl Shave Stowmarket Mortgage Centre
Ed Bacon Trenter Bacon
Nick Trenter Trenter Bacon
Russell Cheshire Mortgages First
Tom Henderson Mortgages First
Jamie Lewis Affinity Mortgages
Simon Jones Affinity Mortgages
Dean Neagen Affinity Mortgages
Ben Carter Affinity Mortgages
Chris Sanderson Accord Mortgages
Colin Newbold Accord Mortgages
Jemma Anderson Accord Mortgages
Event organisers and chair
Danielle Dennis Mortgage Solutions
Victoria Hartley Mortgage Solutions
Oonagh Sheehan Mortgage Solutions