Bristol has a reputation for cool and has seen an incredible boom in the last 15 years, centred around the waterfront, Easton, St Paul’s and Montpelier.
Our attendees also agree that technology means the brokers don’t need to be on a train constantly between London and Bristol anymore. The city has one of the highest retention rates in the country for graduates staying on after university in an area stretching out to Bath and just a 50 minute drive away to the west.
Buy to let
One guest says the demographic of buy-to-let investors has changed to professionals with more cash and more limited company investors. However, another more cynical guest said given the fact limited companies look like a win-win for larger investors the clampdown is likely to be on its way soon.
However, one guest cautioned: “Once it’s in a limited company, you’ve got to pay to get it out again and if the tax regime changes, then people with a limited company are going to be stuck. So, you have to have quite a sophisticated investor to go limited company because half of them don’t understand it, they don’t understand the corporation tax and the double tax when you sell it.”
Brokers said the complexity of the advice needed often means accountants themselves need educating on this citing a customer who was advised not to go limited company when the maths didn’t stack up to do it any other way.
“He’s paying £450,000 for a flat up in Clifton and the rental return is £1,200 so there’s no way you could make it work without putting something like a 60% or 65% deposit in. So you then look at the return on that one and it’s not a good investment. He’s hoping for capital growth. But the accountant was so stupid that he actually thought SPV was required for every single property you bought.”
Help to Buy
Given the high density of new build in Bristol, several of our attendees got very animated over one particular builder that insisted clients used their in-house recommended mortgage adviser and wouldn’t accept an offer without that.
Another broker said his fear on Help to Buy is the density of the new builds suggesting new owners could run into trouble if a high volume of the same tenure suddenly all wanted to sell.
“Do you remember back in 2006/2007 the jump start scheme? You buy this house and it’s all in an area, the houses are all exactly the same, and it’s all help to buy, a problem comes and it’s a case of we want to sell, so do we.., so do we.., and you’ve literally got every house on the market, everyone in the same boat.”
In the Budget, the chancellor announced a new, curtailed Help to Buy scheme would launch in April 2021 featuring regional price caps.
Chairperson Victoria Hartley turned to director of intermediary at Accord Mortgages, Jeremy Duncombe, which has just launched its Help to Buy range, and asked how lenders risk assess their proposition before launch.
Duncombe confirmed questions are always asked head of launch and in an era of stress testing and affordability constraints the product has allowed people to buy who couldn’t ordinarily.
Duncombe said: “Your alternative if you don’t use help to buy is probably to rent. It was never to allow people to buy a bigger house than they wanted to, which may be one of the downsides. However, for the right person, and I’m using a case – my daughter’s situation; she’s bought one and would have ended up having to buy in an area that we wouldn’t have felt comfortable in her buying. She’s bought a house in an area that we [can accept] her living and it’s the right thing for her. So I think for the right people in the right area. What does concern me is where people are buying properties that might be too big for them which stops them moving in the future.”
Brokers suggested that one of the downsides of the scheme is that people don’t think about how they plan to repay a percentage of the equity growth in five years’ time. The marketing could have been handled better by the government but, without it, a lot of people could never have bought which is an overriding positive, they agreed.
Mortgages Market Study
The Mortgages Market Study, published in May this year, was heavily criticised at the time for its fixation on price and ‘shopping around’ as opposed to the advice centric approach of looking at the customers’ circumstances and future plans.
Chair Victoria Hartley asked the attendees how they would describe their value to the customer, beyond not having to wait two weeks for a mortgage appointment at a bank.
Banks aren’t worried about client retention whereas brokers want that client for life and give a service and a duty of care that reflects that, said one guest. Another suggested lenders need to decide if they are offering advice or not instead of hiring and firing adviser staff and keeping the quality of those employed advisers low.
“Customer experience basically, is the difference. I’ll deal with the solicitor, deal with the agent, even tell them to get lost and leave you alone. I’ll do a whole of market, so the client can go and do their job and we’ll do ours,” added another.
The value of a good BDM
The chair says business development managers can be many things, from emergency contact to teachers or case handlers, but asks what brokers really want.
“A call back,” laughed several guests. “Regionally empowered BDMs with the power to fix things,” said another.
The brokers agreed that time is money so they needed the BDM to tell them if a case would go through, especially if a client has already been let down by a bank – or a secret number, that they could call to get that definitive answer.
Duncombe said: “You’ve got a secret phone number, you can pick up the phone and ring our underwriter direct.”
Another broker said: “You’ve got five or six lenders you can choose from and ask the same question and you have to make the call within 24 hours often because the client won’t wait. If you’ve got to wait 48 hours for the BDM, it’s too late, far too late.”
Another added you can get assurance from live web chats but also get misinformation from those, whereas you can be comfortable the BDM is offering the right information.
Digital and technology
None of the brokers around the table had used ‘one-touch’ Application Programming Interface (API) software to submit applications yet and most seemed unexcited by the prospect.
Lenders including Bluestone, Shawbrook, Together, Kent Reliance and Halifax have all confirmed relationships with packager distributors or software firms to trial and go-live with this new ‘no-rekey’ technology.
However, our guests were fearful of lost applications, unnecessary declines and a raft of lenders using brokers as guinea pigs in an endless technology race.
Accord Mortgages confirmed its API software is being built in partnership with Iress and is due to launch in Q2 2019.
Duncombe said: “What you’ll notice is just how quickly that case goes through compared to today. So, for example an underwriter at the moment takes 45 minutes to 1.5 hours to pull in, on every case, information from three or four different systems, then they start to underwrite it. And they underwrite every single case manually all the way through.”
He adds you simply don’t need to treat 50% remortgages with an automated valuation in the same way, allowing those cases to speed through and free underwriting time up for the cases that need it. Accord plans to roll it out during the spring and summer, between April and July.
A broker asked, what if you’re not using the Iress mortgage sourcing system?
Duncombe said however you interact with the lender, direct through the lender website, through another sourcing system, it doesn’t matter. The Iress system will simply streamline the process, with residential going first, followed by buy to let.
“And then the plan is that we start to work with the sourcing systems of third-party providers, the tech providers, and then the direct apply stuff. So this is depending on the system you use, if it’s say Twenty7Tec, or it’s Smartr, or Mortgage Brain. The plan is, over time that we will work with those firms so that whatever you key in then doesn’t have to be re-keyed and it will end up, through API, in our system.”
Our debate on Brexit continued on over dinner. The sighting of Joanna Lumley in the bar afterwards was the only thing that stopped the chatter – if only briefly.
We’d like to thank all our guests for a wonderful evening – and Accord for its partnership in particular.
|Mark||Watson||Watson & Co|
|Ian||Le Petit||Spot On Mortgages|
|Jonathan||Woozley||Basil James Financial Services|
|Lee||Sutton||Steve Mears Independent Mortgage Services|
|Andy||Jenkins||Goodwill Financial Services|
|Ian||Stuart||Ian Stuart Mortgages|
|Phil||Clark||Bristol Mortgages Online|
|Charlie||Brown||Steve Mears Mortgage Services|