Partnering with a specialist protection adviser will typically increase case sizes – Glod
However, the pandemic has highlighted that it has never been more important to have this conversation.
It’s possible that the no-win, no-fee legal claims industry may jump on this bandwagon. This raises the potential for a broker to be pursued for compensation based on lack of advice given — if they cannot prove that they had at least one conversation about protection.
If brokers do mention protection, it is usually life assurance. If they sell a policy then typically it matches the value of the mortgage and costs the client about £20 a month.
It is often better to advise wider cover. Like most things, the cheapest is frequently not the best.
But if you’re a busy mortgage broker, do you have the time or the experience to look at all the conditions associated with every policy? Can you then explain to a client why a policy that costs perhaps £5 or £10 more each month than the cheapest one is far better for them and the reasons why?
During the lifetime of the mortgage less than two per cent of people will die. But about 40 per cent will have a serious illness with financial consequences.
Therefore, critical illness and income protection should be an easier sell. Especially as most younger people are typically more concerned with what happens if they get ill or suffer a serious injury, than if they die — which they rightly consider unlikely.
This can involve a challenging conversation as you have to bring clients face-to-face with the prospect that they may get seriously ill. Done right, however, and they will be grateful that you have made them aware of how they can be protected.
The other challenge for brokers is keeping on top of all the different products that are available. In the same way that mortgage products change all the time so do protection products, with conditions, illnesses and definitions added or subtracted on an almost daily basis.
Larger case sizes
If brokers don’t want this sort of conversation though, or don’t have the time to do it properly, they don’t have to.
Far better to pass it to a specialist protection adviser who can have the difficult conversations. Forming a partnership with such an adviser, the mortgage broker will still get paid.
For a critical illness cover with a premium of £110 per month, a mortgage broker will typically earn £700.
With a protection specialist, average case sizes are generally larger because the protection adviser invests considerable time talking about the different protection products available. Sharing expertise with a client usually results in the client being driven by the value of what they need, which is key.
It’s imperative the client has the cover they need and are driven by the value of cover and not its cost.
This can only happen if the client truly understands what benefits the cover will afford them and why.
The pandemic has highlighted the need for good quality protection – particularly critical illness and income protection which are the policies that younger clients are most likely to call on.
Supporting a client to take on the biggest debt of their lives and not providing them with proper protection advice, particularly at a time of pandemic, just might become the next claims scandal.
Far better, for the client’s sake and for yours, that they are provided with thorough advice so they are prepared for all eventualities.
Also, this will mean you’re not at risk of receiving that phone call asking why the advice wasn’t provided. Better still, you get paid for making sure they receive it.
Brokers who stay connected to customers will embed a lifetime of value – McDonald
This challenge has heightened as new business enquiries leave brokers so busy they cannot easily find time to dedicate to existing customers.
It’s completely understandable. In a lot of cases, those customers will automatically return to the broker for obvious reasons: Namely, the customer has a good relationship with the broker, they trust the adviser and know they will do everything to find the best deal.
But even a light-touch approach to managing existing customers will bear fruit over the long-term. This is particularly true for quieter periods, appreciating these times may be rare at the moment.
Why is it beneficial to have a loyal customer base, when a regular flow of new business is coming in the front door?
It’s about trust.
Should the application hit a problem, for whatever reason, it’s more likely an existing customer will understand – due to their long-standing relationship with the broker – and know they’re doing their best to process the application.
It’s also about knowing your customers. Regular contact allows you to understand your customer’s needs throughout their mortgage term and as their own life situation changes.
They could progress from first-time buyer to home mover to remortgagee. Their needs will change at each stage. They will have requirements for other products throughout their borrowing journey too, with protection and insurance being the obvious two.
There are many tools on the market to help brokers manage existing customers. They enable brokers to handle all of their customer’s financial requirements in one place, including the mortgage, protection and insurance products.
These systems can be costly and time consuming, but managing existing customers doesn’t have to be.
It doesn’t have to mean maintaining a complex database. Nor need it be a costly exercise of sending out regular mailings.
Instead, it can be based on a cheaper solution. Using one of the major e-mail suppliers you can automate a contact with your existing customers. One option is to give an update on the mortgage market and your company – whatever feels natural to you and your business. Even sending a straightforward e-mail at renewal can be surprisingly effective.
Or, it could be call reminding your customer that their mortgage product is up for renewal and arranging a follow-up meeting. These days, that could be on Zoom or Teams, but equally could be a simple ‘phone call.
The solution brokers arrive at will depend on their own business requirements, size and budget.
Your existing customers are your most valuable customers. Communicating with them in a simple and effective way will help to protect your business over the long run.
The stamp duty holiday deserves more praise than scorn – Murphy
Not so for the housing market, though, as this has remained open for business and has in fact delivered year-on-year growth.
There were 50 per cent more transactions in Q1 2021 than the same period in 2020, before Covid-19 had made its effects known. This surge in homebuying has without a doubt been fuelled by the government’s stamp duty holiday.
It’s clear that the holiday’s stated aim has been achieved – it was designed to stimulate activity, and that’s exactly what happened. However, some in the industry have been critical of the tax break, arguing that higher levels of demand drove prices up and cancelled out the savings it delivered.
While it’s true that prices were probably driven up, the conclusion that the holiday’s benefits have been erased is wrong. What the holiday has done is democratise homeownership by reducing the amount of upfront capital needed to get on the property ladder.
For brokers, the holiday has injected huge volumes of business into the market.
Brokers’ primary aim is to help clients get the keys to a new home, and lowering the financial requirements at the start of the journey has made that task easier. Budgets were stretched further and buying power was increased, and their advisory role was more important than ever in helping clients to get the best deal.
First-time buyers were some of the biggest beneficiaries, and those most in need of broker advice, so the holiday not only helped them but created more demand for intermediary services.
A case for technology adoption
That demand has had a similar effect for tech providers, as greater need for advice put broker workloads under strain. In particular, the ability to quickly adopt and roll out a solution became more and more important, and the providers which were best able to do this experienced the best results.
They key challenge for providers as the sector moves back to normality is to ensure that momentum doesn’t dissipate. Adoption has skyrocketed, but if a drop in demand is brought by the final tapering of the stamp duty holiday progress might be lost.
What the holiday has done is shown that brokers are receptive to technology when it makes a tangible difference to how well they can do their job and how well their business can perform.
Therefore, we have to say that its impact has been positive for tech providers, even if their challenge will continue beyond its end.
That said, brokers and tech providers aren’t the only ones needed to play ball if the benefits of the holiday, and the interesting lessons it has taught us, are to be carried forward.
The relationship between lower stamp duty land tax and higher activity rates is clear, and if it were to continue in some form, the housing market’s post-Covid boom may become a long-term trend rather than just a flash in the pan.
Technology and the human touch will form our future broker proposition – Duncombe
Whether it’s swapping the office kitchen for a Zoom call to catch up with colleagues or relying on automated valuation models (AVMs) and desktop valuations over physical reports, we can all recall some change to our use of technology in the last year.
It’s always been around us and of course, as the digital world evolves, it continues to advance at pace. But the question is, has the forced acceleration and adoption of technology over the last year been a short-lived necessity, or is there a chance that as the world opens up, we’ll continue to take advantage of its benefits and adapt to the downfalls to save time?
I suspect it’s much more of the latter.
At Accord, we’ve had a huge year of change as we try to make things easier and more efficient for brokers.
To keep things moving last year we quickly switched to desktop valuations where possible, and we’ve rolled out new API technology to allow pre-population of data to our system, saving brokers up to 20 minutes per case by removing the need to rekey information. We also added our buy-to-let business to our Mortgage Sales and Origination (MSO) platform, meaning advisers can do both buy-to-let and residential cases with us in one place.
The latter is the biggest single investment we’ve ever made in our systems to improve the way brokers do business with us, for good reason.
Just last month we introduced new propositions including top slicing, new build for landlord clients and lending in Scotland. Without MSO this just wasn’t possible.
Adoption leads to development
And the more that lenders embrace new technology, the more I expect we’ll see exciting propositions come to market to meet the changing and increasing needs of clients, which can only be good news for brokers.
But it’s not just the big-ticket items. Smaller changes such as streamlining manual tasks with automated bot technology or increasing availability of webchat functions can make significant differences to the experience brokers, and therefore their clients, have.
Whatever positive technological changes lenders make, we know we’re only one part of the mortgage journey. There’s been digital advancements at other stages too.
Sourcing systems, aggregators and in many cases, brokers have all taken necessary steps to become more sophisticated, and as a combined force the industry has found ways to streamline the process during what have been some of the busiest months for lending ever seen.
Get on board with digitisation
However, we recognise that no matter how good we become with technology as an industry, it’s not a standalone solution. It’s important, there’s no doubt about it – it’s even a risk if you don’t or can’t keep up – but it’s hard to imagine that it will ever replace the value humans can add.
I only see the two complementing each other more in the future.
The better we all get at using technology, the more time we’ll have to focus on the things that matter. For brokers, having API technology to save rekeying will free up time to spend with existing clients, or generate new leads.
Likewise with systems such as MSO, the ability to self-serve and keep updated on case progression without chasing updates, all improves experience.
Meanwhile for lenders, digital assistance can help create a better packaged case, which enables us to assess cases quicker and turnaround offers sooner. Our underwriting team for example, will still be directly accessible, but have capacity to focus on our common-sense lending approach, underpinned by modern, digital systems and software to help brokers secure properties for clients.
We’ll always continue to look for ways to improve our systems and processes to make things better for brokers and their clients, but we’ll never rely solely on technology – we’ll just use our human touch more wisely, in ways that are needed and that add value, to continue to go above and beyond the expectations of those who do business with us.
FCA ban on GI price walking gifts new service dimension to mortgage brokers – Martin
Price walking effectively punishes loyal customers, with policyholders paying artificially inflated renewal premiums to subsidise the much lower prices offered to new customers. The Financial Conduct Authority (FCA) ban on it comes into force in January.
The practice has been widespread in the direct-to-consumer (D2C) motor and home insurance markets for many years. The FCA estimates that the insurance industry gained £1.2bn from six million policyholders through price walking in 2018. It predicts that the new ban will save customers £4.2bn during the first ten years following its introduction.
Emphasis on value
The ban will level the playing field for the home insurance market. It will make it easier for mortgage brokers to offer customers competitive, but realistically priced, insurance products, carefully tailored to match customers’ specific requirements. In effect, the FCA’s actions offer an opportunity to rebalance this market, ending a race to the bottom on price and moving instead toward an emphasis on products and services that offer real value.
The ruling also offers brokers new opportunities to contact customers more regularly during the lifecycle of their mortgage, to offer them additional products or service enhancements and to nurture stronger relationships. Brokers and customers will both benefit if brokers are then able to develop comprehensive packages of tailored products and services.
And, if customers are less tempted by loss-leading quotations from the D2C market, it should be easier for brokers to win new business alongside remortgage and product transfers.
Brokers will be able to draw on sourcing systems, clubs, networks and trade associations operating in GI to help customers find products to meet their needs. Even brokers who don’t normally advise on GI can help their customers to benefit from the FCA’s ruling, by working with distributors and other partners to refer to a suitable provider.
Customers who shop around every year for the best insurance quotes may be disappointed by the immediate consequences of the FCA ban, which could remove some of the very cheapest deals from the market.
But brokers should seek to explain that the ban will benefit all insurance customers in the longer term, that the cheapest deals are rarely the best choice for most customers, and that the way to ensure the best outcome is to work with a broker who understands the customer’s requirements and will search for products that genuinely meet those needs.
The FCA’s ruling offers an opportunity for customers to discover that not all insurance policies, services and intermediaries are the same.
It gives the best mortgage brokers a chance to prove their true worth by adding a new dimension to the already exemplary services they deliver – and an opportunity to enjoy significant commercial rewards as a result.
There is plenty of life left in the post-stamp duty holiday market – Rowntree
Although I expect that the surge in buyer demand experienced over the past year has in part been driven by a fundamental shift in lifestyle changes and the desire for something ‘different’, there is no denying that the stamp duty holiday has been a major contributory factor.
Looking at Paragon’s book, we see that over 50 per cent of the business we’re still taking is for purchases.
There’s little doubt the holiday particularly resonated with buy-to-let investors and I’m pleased the Treasury saw sense and pushed back the cliff-edge of the initial March deadline and introduced the September taper.
The opportunity to acquire new property with cheaper buying costs has been compelling, particularly during a period of intense tenant demand which shows no sign of letting up. The opportunity to secure a maximum £15,000 tax saving cannot be ignored when analysing a property investment.
Industry figures show that 29,000 buy-to-let loans were written for house purchase during the first quarter of 2021.
Landlords have also taken the opportunity to incorporate their portfolio structures into limited companies and this will show as purchase business.
This means that it is still unclear as to what the final total will be, but we can be confident that the initiative has acted as an incentive for investment when we compare the number we have now to the figure from the same period last year which was just a shade over 18,000.
The first quarter of 2021 was the highest since the corresponding quarter of 2016, after which the three per cent stamp duty surcharge was applied to buy-to-let purchases.
Gains in high value areas
What’s telling is that the regions with the highest average house prices recorded the greatest spikes in buy-to-let house purchase.
London, for example, recorded a 76 per cent increase in buy-to-let mortgages for house purchase during the first three months of the year compared to the same period last year. Similarly, the South East was up 66 per cent and the South West up 62 per cent.
Northern regions, where the benefit of the stamp duty holiday is less pronounced due to lower average house prices, still experienced impressive growth, but it was muted compared to southern locations. The North West was up 30 per cent in terms of the volume of buy-to-let mortgages for house purchase, whilst Yorkshire and Humber recorded a 34 per cent increase.
Of course, there could be other contributing factors why the South has seen a sharper increase in buy-to-let house purchase.
UK Finance recently noted in its Household Finance Review that Londoners have been selling up and using their strong equity positions to buy property in locations further afield then the suburbs or periphery outright.
Shift to renting
However, not all want to move to a new area and buy right away. Renting is the ideal option for many as they test a location before buying and landlords have been responding by acquiring new property in southern areas outside of the traditional London commuter belt.
Our in-house surveyors report strong demand for property in the likes of Bristol, picturesque southern counties and coastal locations.
One acquaintance of mine is doing exactly that currently and is searching for family rental accommodation in Buckinghamshire.
The issue she faces is competition for that type of property, which is fierce, and she is facing the prospect of sealed bids from nine to 10 competing families for the homes she is interested in.
Landlords are responding and adding family homes to their portfolios. Purchases of buy-to-let detached homes was 66 per cent higher year-on-year in the first quarter, whilst semi-detached homes were 56 per cent up.
There is plenty of life left in this shift in housing demand and whilst the stamp duty holiday helped light the touch paper for property sales, there are longer-term factors at play here that are creating sustained demand for housing more broadly.
That will benefit landlords and, of course, Rishi’s tax take.
Advisers should relish in attention-grabbing sub-one per cent deals – Clifford
Certainly, it’s a big tick for innovation and reputational PR, as a major operator like HSBC works hard to stay in the mix on competitive rates which help brokers.
Similarly for Platform, they may feel the name and brand recognition is worth a foray into this highly competitive low rate.
Not just for the few
Of course, there can be some moans from advisers about the launch of such headline-grabbing rates which may have a very small ‘catchment area’ in terms of borrowers or clients who qualify for them.
However, from my view, we should not underestimate the new business such ‘headlines’ can generate for advisers. Existing clients and potential new ones see these rates and this often acts as a catalyst for activity, even if they are unable to grab that particular mortgage product.
Any activity which continues to drive borrowers to consider the rates they are on, and whether they are currently overpaying on a standard variable rate (SVR), and ultimately ensures they seek the services of an adviser is no bad thing in my book.
Are we going to see an over-supply of this low-rate and low-LTV segment though? Possibly, but again a plethora of choice is good for advisers and consumer outcomes. Better to have too much to choose from than a dearth of product.
Benefits to the lender
Plus, for those who say business levels written at these rates will be negligible, we shouldn’t underestimate the importance of securing new borrowers. The bigger lenders, for instance, see redemptions and significant borrower outflows every single month, and this will increasingly happen as we see remortgage activity beginning to thrive again.
That back book has to be replenished.
Most lenders also have substantial new business targets to achieve this year. At the start of the year, if you carried out a back-of-a-fag-packet totting up of each lender’s aspirations for its own 2021 lending versus the gross UK lending available, you will have noted the combined targets were substantially greater than the market total.
Some will prosper and grab the share they need and some will not.
The leading players won’t want to lose market share and, with strong balance sheets and their access to relatively cheap funding, they are much more able to turn up the dial through the likes of cheaper rates.
Service standards get you a little extra – especially in a very busy market – cheaper products can win you a lot.
You, the adviser, remain vitally important to mortgage lenders and their desire, perhaps need, to maintain or even grow their own market share.
This fight for quality and volume is good news for intermediaries and borrowers.
Keeping on top of GDPR-compliance in a changing data landscape – Dobson
Amidst all the fevered activity and rush to get the deal over the line, is it likely that for every transaction all the personal data has been processed and securely stored according to GDPR requirements?
Given how guidance on due diligence for anti-money laundering (AML) purposes changed during the initial lockdown from showing hard copy documents such as passports and driving licences to sending in scans and photos by email for verification, it would be a minor miracle if no breaches had occurred.
It has been a difficult and at times confusing period for AML and due diligence regulations, with some big changes being introduced in recent months which regulated businesses need to absorb.
It is now three years since GDPR came into force in the UK, and many businesses are still grappling with it.
It raises some interesting questions about where and how client data is stored, and the lengths to which brokers, lenders and conveyancers are keeping it secure.
It’s common for customer documents to be photocopied and kept in a filing cabinet, maybe a desk drawer or even somebody’s in-tray, so they’re within easy reach while working the case. But that also puts them within easy reach of anybody who isn’t authorised to view them.
Clearly that poses risks in terms of GDPR, so more likely the data is kept on a digital database on the firm’s network. However, can you be sure your hardware is secure?
In addition, when did you last scrub the hard drive on your photocopier? A lot of copiers still take an image of the document you’re copying and store it on the drive, which means when it’s time to upgrade your machine you’re sending all that data out of the door unchecked.
Data hosting is one of those behind-the-scenes functions that is incredibly important for the compliance of a business but can get left behind amid the rush to get the deal done.
Brokers are needlessly paying for multiple checks with different agencies, and there is also a huge cost in terms of time as they can spend hours manually checking hard copy documents which is not necessary.
The technology available today will not only host the data securely, but also carry out ongoing monitoring which automatically updates client records if things change, as well as search multiple databases in seconds.
The result is a full, FCA-compliant report whenever a search is carried out, so if a business does get a knock on the door from an auditor, the data is compliant without having to do anything.
For businesses getting to grips with the post-Brexit regulatory landscape, switching to electronic verification for customer onboarding processes will save time and money, and ensure you always know where your client data is.
It is time to pay an interest to decreasing term rates – Woollon
With more fixed-rate longer term deals than ever before – for individuals and landlords – it’s no surprise that more than half of all remortgages and product transfers use five or 10-year fixed rate deals.
However, after more than a decade of low interest rates, why are decreasing mortgage policies still being quoted and set up on a default eight per cent interest rate and existing policies rarely reviewed?
Whilst mortgage protection business is often transactional and written using a higher default rate to cover most eventualities, at best clients are paying for extra cover and at worst they are paying for cover they don’t need.
A decreasing mortgage policy recognises that the mortgage will reduce over time, with the outstanding mortgage dependent on what interest rate is being paid.
When a policy is set up, if the interest rate assumed is higher than that actually paid, the sum assured will be more than the outstanding mortgage. If the interest rate actually paid is higher than the assumed rate, the sum assured will be lower than the outstanding mortgage.
Considering that by value, 98 per cent of all residential loans are advised and advisers are looking to develop ongoing relationships with clients, surely this should be part of the clients’ mortgage and protection review.
After all, this may be the only time for the next five or 10 years you get to review your client’s mortgage-related protection needs.
With clients far more switched on than a decade ago when it comes to reviewing bills, aligning the assumed rate used in their mortgage protection policy closer to their actual mortgage rate shouldn’t be a surprise to them. It may even be an expectation.
Whilst product providers offer a range of interest rate options – varying from one per cent to 20 per cent, though thankfully those days are gone – in the main these are fixed at the outset and cannot be changed.
We believe that a client’s policy and adviser should be for life and that’s why we provide the flexibility to decrease or increase the interest rate at any time during the term without underwriting, so it more closely reflects the actual mortgage rate being paid.
Let’s look at some examples:
- First-time buyers: 30-year £250,000 mortgage at 83 per cent loan to value (LTV), on a five-year fix at 3.1 per cent. Joint life decreasing term life assurance (DTA) at four per cent vs eight per cent over 30 years = £310 difference over term five, which could pay for waiver of premium instead.
- Existing homeowners with kids: 20-year £200,000 remortgage or product transfer at 67 per cent LTV, on a five-year fix at 1.54 per cent. Joint life DTA with critical illness (CI) cover at two per cent vs eight per cent over 20 years = £2,515 difference over term five, excluding the difference during the first five years, which could pay for the addition of children’s CI benefit and multi-fracture cover instead.
- Many buy-to-let landlords arranged five-year fixed rate mortgages in the run-up to the three per cent stamp duty land tax (SDLT) surcharge in April 2016, which are expiring and could prompt an increase in remortgage business. The same approach can apply if interest-only.
It should be noted that the client is effectively swapping a higher sum assured for another benefit, providing choice and flexibility to tailor the policy to the client’s needs.
As 2021 shapes up to be the year of remortgages and product-transfers, it should also be the year you review your client’s mortgage-related protection needs and interest rate used in their decreasing mortgage policies.
Closing the North-South house price gap is good news for later life sector – Rozario
The endless Brexit drama, the Trump farce and even the pandemic itself has brought into sharp focus just how stark the differences between everyday people can be. However, one such split that seems to be on the mend is the ‘North-South divide’.
As a northern lass who has spent much of life living down south, this one means something to me.
There’s still always going to be a divide between the North and the Couth – who’s got the best chippies, the best accents, the best music – but I feel like it is shrinking where it matters most.
Namely, financial outlook.
For years, the south of England, and in particular London and the South East, has run away with it. Catalysed by huge house price inflation, these areas have become incredibly affluent and sometimes unaffordable for many.
However, is this going to last forever?
There is a mountain to climb for the North to get close to even drawing level, but recent signs are positive.
According to the latest data from chartered surveyors, E.surv: ‘Annual house price growth surpassed 20 per cent in Northern cities’ in the past 12 months.
But, in London, once the epicentre of historic house price inflation, growth has lagged way behind. In fact, E.surv claims, ‘Greater London had the lowest price growth rate of all the regions at 2.8 per cent and is the only one to have a rate of less than 10 per cent.’ Perhaps the tide is turning?
For equity release, this is good news.
Benefits to later life options
For a long time, I have felt that the further the divide between house prices in the North and the South grew, the weaker the broader later life lending offering becomes.
We want a united product and offering across the nation, so the North catching up with the historic gains of the South means that more of our customers are on an even keel.
Of course, property prices in the South remain buoyant. In some specific areas they are actually booming – the South West jumped 2.6 per cent in March versus London’s tamer one per cent growth.
So, ultimately, any northern expansion isn’t coming at the expense of anywhere else in the country, it just brings everyone closer together.
With more property wealth beneath their feet, prospective equity release customers can start to view lifetime mortgages as a more viable option. An option, of course, that must be entered into with careful consideration and only when the time is right, but an option that is solidified by a nationally growing property market.
Overall, the north may still be a little bit behind, but it feels like the property market can be the engine room for catching up.
There’s still a road left to travel and the boom in London and the South East has put them well ahead, but now I don’t feel like they are out of reach.
However, regardless of what the future holds for the North and the property market, I know where I’ll be going for my fish and chips.