Optimising digitally can let brokers focus on advice – Hyland
Too many businesses are failing to address their digital deficit, by allowing the organisation to operate at less than maximum efficiency or not creating additional value from existing technology investments.
By optimising existing systems, the emphasis is on developing a state of readiness and efficiency, which ensures new platforms and working practices can be introduced, without radically changing the business model.
How to optimise
The process of optimisations starts by identifying aims – what does the business want to get out of its use of technologies?
Once the aims are clear, all systems can be integrated into a modern single enterprise hub system that will be tailored to address those needs.
Full, controlled access to data by people and technology is essential.
A holistic approach should also be instilled in the working culture: client information must always be updated and shared with colleagues immediately because you never know when a customer will call back.
Remove multiple formats
Digital optimisation creates a focus on using technology effectively.
For example, a digitally optimised broker business won’t have data filed away in formats that are hard for staff to access, on different IT systems, or in legacy spreadsheets.
Instead, all customer and mortgage market information will be available through a single information hub, with staff able to view everything they might conceivably need to deliver excellent service, on a single screen.
This centralised approach to client and market insight helps comply with regulatory and security standards, and ensures that customers are provided with accurate and timely information.
Digital optimisation ensures that all IT is working for the humans in the business, not vice versa.
This is the key to maximising value, as it allows staff to offer their best service to the client.
A centralised, optimised approach will also be essential if a new generation of intelligent systems are to be integrated into the technology mix at medium-sized enterprises such as mortgage brokers.
However, that is a final stage and not the immediate goal of digital optimisation.
Only once the business maximises its efficient use of current systems can it consider automating the tasks that are time consuming but simple; and it can think about what new technologies can improve the business and help deliver value to clients.
A digitally optimised broker will always seek to incorporate any new additions into its existing ecosystem and service mentality, rather than attempting a fundamental technology overhaul every few years.
With higher tenant demand coming lenders must support landlords – Ying Tan
Generally speaking, national tenant demand between May and June is usually muted, reported to be around a one per cent fluctuation over the past four years.
However this year the Rightmove Rental Trends Tracker outlined a seven per cent uplift, representing a marked change.
The question is – with increased tenant demand being evident, what have lenders done to support landlords over the past month?
In terms of innovation, LendInvest launched a bridge-to-let product for borrowers seeking to refurbish a property before exiting onto a buy-to-let mortgage.
This is available for amounts between £75,000 and £750,000 on terms up to 12 months on a light refurbishment of residential properties, including HMOs with a maximum of six bedrooms.
A maximum loan to value (LTV) of 75 per cent applies at an interest rate of 0.60 per cent per month. This comes after several changes to LendInvest’s buy-to-let proposition, which now offers loans up to £750,000 for its five-year fixed rates and contributions to legal fees.
Accord and Paragon
In terms of rates, fees and criteria, Accord Mortgages has released a range of fee-free two-year fixed rate buy-to-let remortgage deals and reduced rates on selected two-, three- and five-year fixed rate buy-to-let mortgages by up to 0.11 per cent.
Paragon has also reduced rates within its buy-to-let mortgage range.
Furthermore, the lender has removed up-front fees and introduced a £350 cashback on selected portfolio and non-portfolio products from 75 per cent to 80 per cent LTV for landlords with single self-contained units, houses in multiple occupation or multi-unit blocks.
Leeds BS and Kensington
Leeds Building Society has cut rates on selected buy-to-let mortgages by up to 0.16 percentage points.
The mutual has also introduced a new cashback incentive. It is now offering a 1.69 per cent two-year buy-to-let fixed rate mortgage up to 60 per cent LTV with a £999 fee.
The range has also been expanded to include new five-year fixed rate buy-to-let cashback products.
The new £1,000 cashback incentive products – which include a free standard valuation and fees assisted legal services for remortgages – comprise a 2.94 per cent five-year product available up to 60 per cent LTV with no fee, and a 3.11 per cent five-year deal available up to 70 per cent LTV with no fee.
Finally, we also saw Kensington Mortgages dropping its minimum loan amount from £100,000 to £70,000 with the aim of helping more customers to achieve their buy-to-let ambitions.
These are all positive additions to the sector and let’s hope they will help landlords meet more of their tenants’ needs, without them having to pay any unnecessary fees along the way.
‘UK is already regarded as an established Western hub for Islamic finance’ – Al Rayan
And more recently, overseas homebuyers in the UK are benefitting from the relatively weak value of Sterling, which has consistently declined against the value of the dollar for more than a decade.
This effectively has made UK property more affordable, not just for UK expats in the United States, but for those living and working in many countries around the world which peg their currencies to the US Dollar, such as the Gulf nations.
These factors combined have helped to create new demand for home finance from expats looking to purchase property back in the UK.
In the last two years Al Rayan Bank has provided £152m worth of home finance to expats, an increase of 187 per cent on the prior two years.
Of this, we receive most demand from the Gulf region, with 26 per cent of our expat customers residing in the UAE, followed by Qatar with 19 per cent, and Saudi Arabia with 15 per cent.
To supply this increasing demand, Al Rayan Bank has invested in its distribution channels through locally based intermediaries, so that more expat consumers in the region have an awareness of the options available to them.
Opportunities for brokers
As well as offering competitive finance rates, all Islamic home finance products, including home purchase plans and buy to let purchase plans, are Sharia compliant.
This means the money deposited in the bank cannot be invested in industries associated with gambling, tobacco, alcohol, arms or any commodity that is not in keeping with the ethical values of Islam.
As a result, this is the ideal option for those looking for home finance to align with ethical or religious beliefs.
Islamic banks often provide great value too, as they are not allowed to charge arbitrary fees to their personal customers.
There is still work to do to raise awareness of Islamic finance.
By working collaboratively with intermediaries, we can help to educate consumers on the benefits of using these products.
The UK is already regarded as an established Western hub for Islamic finance.
The next goal is to continue to raise the profile of Islamic home finance among those living in the UK and beyond.
When execution-only goes wrong: ‘They were taking one thing and ended-up with another’ – Platform London Supper Club
While headlines have centred on precipitous house price drops of up to 20 per cent in London over the past two years, they haven’t been telling the whole story. Brokers are upping their game.
“We’ve got two different markets. There’s the prime market which has definitely slowed because of stamp duty mainly. Brexit has also affected foreign nationals coming in — although that’s starting to turn round the other way now, with Sterling so weak,” said one attendee.
“But the reasons why people buy houses are still there. That underlying demand is still there, and that’s been pent-up; loads of people have put their properties and lives on hold because of Brexit.”
“Brexit is affecting absolutely everything, especially in London. That was proved when they moved it to October, all the MPs went on holiday and the phones went ballistic. The moment they came back and started talking about European elections, everything died again.”
Return of first-timers
Brokers noted that first-time buyers were starting to return to the market this year, especially on the outer edges of the capital.
But the cost of renting is significantly impacting on the demographic of buyers and their future moving plans.
“People have rented for four or five years, so when they buy a property, it’s not in their psyche to say we’ll move in two years,” continued another adviser.
It was noted that first-time buyers are no longer in their early twenties and so this has affected their homeowning journey.
“The demographics have slipped a generation so these people are generally in their 30s. So it doesn’t necessarily pay to go to that one-bedroom flat. You go for the family home straight away.”
Protecting the inheritance
This took the discussion onto the growth in family support for first-time buyers and in particular using equity release to help fund deposits, which as a result has “gone bang” in London.
“Clients in their 70s that are mortgage free and are living in houses that they couldn’t ever imagine being worth £1m, are saying ‘I’ll take £100,000 or £200,000 out to give to the kids now, because I’ve got to get rid of them somehow’,” said one broker.
Another added that with the ability to make overpayments in many cases the children benefitting were making the interest payments.
“The kids don’t want to ruin their inheritance so they make the interest payments and then the debt will remain pretty much stable,” they added.
And it seems the boom in equity release is also feeding further business relationships for brokers, as the one transaction can then lead to three or four others from relatives or friends.
Execution-only goes wrong
The debate turned to the regulator’s proposals on increasing availability of execution-only for mortgage borrowers.
This has hit a nerve with much of the adviser community.
While some advice firms want to explore the potential for offering their own execution-only service, one said they “would not entertain it,” with the likely impact of professional indemnity insurance a key concern.
Another broker noted that the whole issue had come about as a result of lobbying by certain lenders and fintech companies. The regulator was “absolutely clueless” about how the industry works, they said.
Brokers’ big fear was that ordinary customers will lose out as a result.
“They have no idea what they’re doing. They don’t know who they’re protecting, they don’t even know what the problem is and they’re going to cause so many issues,” the broker said.
Another attendee agreed and recounted the experience of a client who had decided to complete their remortgage themselves instead of taking advice.
The client believed they had taken a tracker with no early repayment penalties, however they discovered this was not the case when after three months their circumstances changed significantly.
Instead, the client had actually agreed to a five-year fix with extensive repayment charges through an unadvised transaction direct with the lender.
“This was an educated person on their third mortgage who thought they were taking one thing and has ended up with another,” the broker added.
‘Never see those clients again’
This led on to the development of product transfers within the broker market and warnings that while it may seem like a viable strategy now, this was unlikely to continue.
“If you add into that technology, execution-only and that the Financial Conduct Authority (FCA) has basically given them permission to dual price, then look at the business in two-to-five years’ time,” another attendee continued.
“There are a lot of brokers out there who are now quite rightly recommending five-year fixes on product transfer, but because they think it’s easy. They’re not going to get those clients back.
“They’re never going to see those clients again.”
One broker noted that firms needed to begin their retention strategy the moment a client completes, including sending useful information and other regular contact throughout the mortgage term.
“We know if we have an offering that is compelling enough, we’re not going to lose that client,” they said.
Brokers must do better
Finally, the discussion moved on to lender service levels and how quickly underwriting and cases were completing.
The focus was on brokers doing a better job of packaging cases correctly.
“Lenders are putting more onus on us. They’re coming in and showing us adviser by adviser who is fully packaging within 24 hours,” the broker said.
“The issue we’re hearing from lenders is a lot of brokers are still keying it in even though they only have half the documentation, and then when the offer comes out a month later, they’re blaming the lender.
“What I’m seeing is a lot more lenders saying, ‘here’s our service level agreement, if you give us X you get your offer in Y’.”
This was echoed by another adviser who said they had analysed their consultants’ performance with similar results.
“We do application to offer times to lender and then we do it per consultant. It’s really interesting to see, the same consultants who are good, the same consultants who are bad, it’s all down to packaging.”
Ann Brown, Charles Cameron
Greg Cunnington, Alexander Hall Associates
Jane King, Ash Ridge
Phil Leivesley, Monica Bradley Associates
Gareth Lowman, SPF Private Clients
Andrew Montlake, Coreco
Kelvin Redwood, Redwood Financial Consultants
Martin Stewart, London Money Financial Services
John Stonestreet, London Money Financial Services
Stacy Wells, FundU
Borrowers earning over £70k are still having problems securing a mortgage – Harpenden BS
However, one of the greatest paradoxes in the mortgage industry is that many successful people find it just as hard to secure a mortgage as those on modest or average incomes.
Why is it that those earning above £70,000 are finding it difficult, and what can the industry do about it?
Zero hours contracts
According to the Office for National Statistics, shortly after the coalition government took office in 2010, the number of people on zero hours contracts rose significantly. It reached a peak of around 900,000 at the end of 2016, and fell back slightly to around 850,000 at the end of 2018.
The proportion of the workforce on zero hours contracts also increased, varying between 0.4 per cent and 0.8 per cent from 2000 to 2012, before rising to a peak of 2.8 per cent in 2016.
Many people don’t associate a zero hours contract with high earners. However, if someone is on a very healthy income and is self-employed, many lenders assess their income in precisely the same way.
If income is not guaranteed and there is no fixed-term employment contract, they could be classified by many lenders as being on a zero hours contract. A classic example of this very scenario is a barrister.
Qualified barristers in private practice with around five years’ experience can earn anything from around £50,000 to £200,000 per year. For those with over ten years’ experience, earnings can range from £65,000 to £1,000,000. Yet barristers in private practices can struggle to find a lender willing to help.
Technology is a barrier
Technology will have an important role to play in the future of the industry, however, unless it works hand-in-hand with common sense and experience, it becomes a barrier.
We have seen an increase in the number of higher earners coming to us after experiencing major difficulties in trying to secure a mortgage elsewhere.
The most recent example was one of our customers who is one of the world’s leading performance psychologists and an expert in high performance. His skills have helped six sports people get to the top spot and he delivers leadership programmes at board level for organisations all around the globe.
He was looking to remortgage his house to buy a new property, had accounts which showed year on year growth for many years and he had never missed a mortgage payment in twelve years. He explained that none of the lenders he had talked to would look at his situation because he ‘did not fit their computer algorithms’.
We worked with the broker and the customer to get a full perspective on his application and history. One of the main questions our underwriters asked was: “Is this individual going to struggle to find work in the future?”
This made it an easy lending decision for us. While there was no evidence of an employment contract in place, after talking to the customer it was clear that his experience, reputation and personality would make future employment problems unlikely.
The importance of analysis
As the political and financial outlook remains volatile, we believe that brokers will play an increasing role in the mortgage industry. We think complex applications will increase and the experience of brokers will be invaluable in offering the right advice.
What they need from lenders, particularly when dealing with wealthier customers with complicated income sources, is the freedom to apply common sense and experience. Currently, most of the industry relies mainly on the inflexible rules set by computers rather than taking the time to understand applications from a holistically affordability perspective.
We have definitely seen a rise in the number of brokers coming to us with cases of high earners facing challenges in getting funding for their new homes. They are often frustrated and baffled by the reasons for rejection.
Higher earners need specialist support. Brokers able to understand the complexity of this group, working with experienced lenders, will almost certainly increase their income potential over time.
Remortgaging could become the next interest-only crisis – Phillips
While most of those borrowers will engage with their lenders and agree on a resolution, many are more reluctant because they fear they simply have no way of paying back the outstanding debt.
And equally, many lenders were burying their heads in the sand, unwilling to start proceedings against interest-only borrowers.
The FCA’s thematic review raised the urgent need for all lenders to deal with interest-only borrowers in both a timely and compassionate way, and things have certainly improved.
Many lenders are now engaging with third parties to find solutions for borrowers who have an interest-only mortgage with no repayment vehicle in place.
Now the issue of interest-only is being tackled, you would think that there is no need for this type of situation to occur again.
Lending criteria is much stricter than it was when many of these interest-only customers were first accepted for mortgages, and for those who are already struggling, or are likely to, there are now many more solutions available.
New crisis brewing
But I fear there could be a new ‘interest-only’ crisis starting to brew.
The latest figures from UK Finance reveal a huge increase in remortgaging volumes, with a 19.8 per cent increase in new remortgages with additional borrowing.
The average additional amount borrowed is now £52,000.
Many of these people will be remortgaging to add value to their homes – perhaps using the money to extend or make other improvements.
But there is also a worrying trend whereby borrowers are refinancing every couple of years and taking equity out when doing so.
This, of course, means that despite having a capital repayment mortgage – which in theory means that at the end of the term they will be debt-free – many of these borrowers are simply building up debt as they go.
And we could see a situation where borrowers are reaching the end of their mortgage term and have not repaid because they have remortgaged too many times.
Can they handle repayments?
Meanwhile, others will still be saddled with mortgage payments well into retirement from the additional borrowing they have added to their loans and extending their original 25-year-term considerably.
Remortgaging with additional borrowing is not only up almost 20 per cent on last year, but almost 11 per cent on last month, which was already a 27 per cent increase on the month before, and it is certainly a trend we have seen over the last few months.
Like with interest-only customers that are either struggling or may struggle in the future, lenders should be looking now at customers who have remortgaged and taken on significantly more debt to ensure that they can handle their repayments.
Seven simple steps to help brokers maximise their website – Knight
An examination of Google Trends in 2018 found that searches for ‘mortgage broker’, which now automatically highlights local mortgage brokers with a web presence at the top of any Google search, reached a 14-year high, having increased by 180 per cent in five years.
This growth in consumers seeking information regarding mortgage brokers online was suggested to have mirrored the growth of intermediary mortgage completions.
Which leads to the question – how can intermediary firms capture the online attention of even more potential borrowers?
Online presence is essential
Well, firstly they must have a web presence.
This may seem like common sense but there are still intermediary firms out there who do not have a website and yet expect business to flood through the door.
Now this might not be the main generator of business for all firms, but in not having a functioning website brokers are putting up a large barrier to new business.
Although it’s also prudent to point out that building a website is just the start. Firms must work with it, not against it, to generate new leads.
So, here are seven simple steps to help you get the most out of your website:
- Make sure you sign up to a free Google Analytics account. This will enable you to track how many people are visiting your site, where they are coming from, what they are clicking on and if the number of visits is growing or declining – among many other features. To do this, I suggest speaking to whoever manages your website to insert a simple piece of code and then search “google analytics” online.
- Think about what potential clients might search for and use those terms (keywords) in the content on your website. However, bear in mind that Google penalises websites that have “keyword stuffing”. Ensuring you have the balance between educational content and incorporating the right number of keywords is vital in building and maintaining a strong ranking across the search engines.
- Link pages on your site to each other e.g. if you have copy about portfolio landlords, link the word portfolio to your portfolio page. This encourages users to visit more than one page on your site.
- Make sure any images used on your website are good quality, but are not huge files as this will affect the speed in which the pages load and create a less than optimal user experience.
- Ensure that you have no more than seven headings in the top menu navigation bar. This helps keep your website clean and simple to use. The headings should make it easy for users to find other pages which will be of interest to them.
- Make sure your homepage clearly states who you are and what you do. This seems like a no-brainer, but you’d be surprised how many websites miss the mark on this.
- Think about what your main call to action is and then make it easy for people to do just that. If you want them to contact you then make sure your contact information is visible on every page. Then use unobtrusive prompts to help them act.
I could go on, but it’s important to get the fundamentals right, after which you can always implement more sophisticated engagement methods.
Getting the most out of human underwriting – Haresnape
The biggest misconception we encounter is faith in the inscrutable power of the modern lending market — the credit score.
Some brokers we speak to believe it will remain the biggest consideration, even when dealing directly with a human underwriter. Most believe it will always count against their client to some extent.
In fact, it’s not the ball and chain many assume it to be.
Done properly, underwriting finance on a case-by-case basis gives providers the power to adopt different strategies that benefit borrowers, including:
- Setting the credit score aside entirely and focusing on the realities of a customer’s real financial situation;
- Taking into account rental top-ups, so the expected income generated by a property is reflected in the landlord’s affordability calculations;
- Considering various types of income;
- No arbitrary limits on how many rental top-ups should be considered.
What brokers should do
And that’s the way it should be. Human underwriting suggests a degree of common sense and flexibility applies — and that’s absolutely essential.
It is not a box-ticking exercise and should not just be a computer-based scoring system by another name. This is especially important for customers with slightly unusual circumstances.
So how do you get the most out of human underwriting?
- Get on the front foot and speak to a business development manager (BDM) before submitting an application. You will be told what really matters in each case, allowing you to make the time spent compiling evidence really count.
- Don’t assume a single issue will sink an application and focus on the positives. Providers using human underwriting are doing so because they want to say ‘yes’. They’re willing to invest more time and resources identifying the valuable customers that more rigid companies allow to slip through their fingers. Be transparent and build a case for approval.
- Move early. Difficult cases are often on a deadline. Give yourself and the BDMs as much time as you can to find a solution.
Put common sense back in
A good example was a customer who accidentally missed a credit agreement payment, after mistakenly believing he had set up a direct debit. This had badly affected his credit score.
Other providers had already turned him away on that basis alone. We took a different view and simply asked for evidence that he had been in possession of the funds needed to make the payment when it was missed.
A second customer — a portfolio landlord — had bridging finance to fund a new project that was secured across six properties. This was proving costly and she wanted to refinance those loans.
Many lenders do not want to lend against a portfolio exceeding three or four properties. We looked at the whole portfolio and were able to take all the rental income and the individual finance to value ratios into account.
This is how human underwriting can put common sense back into affordability checks.
Access to underwriters should be the norm because plenty of credible customers end up in unusual situations. It’s only good service to see an opportunity where others see a nuisance.
Equity release specialists ahead of the game on vulnerable clients – Wilson
The regulator has been particularly vocal and stringent within our product area — with its rules and on the need for advisory firms to be vigilant and to avoid practices which may, even unwittingly, take advantage of vulnerable customers.
This week’s launch of the Financial Conduct Authority’s (FCA) two-stage consultation on helping firms treat vulnerable customers more fairly is therefore not a surprise.
This is not just an issue for equity release or later life lending customers.
The regulator is clearly looking for a mindset and culture change from advisory firms in how they deal with and advise vulnerable customers.
Equity release firms and individual advisers are perhaps more likely than average to be aware of the potential for a client to be vulnerable, because they are far more used to seeing these individuals.
Our sector has been, effectively, restructured to ensure better soft skills and levels of empathy and a willingness to go above and beyond the typical adviser’s role in supporting their clients. Our clients will be over the age of 55 and many will be a lot older.
There’s also been a commitment to ensuring that such clients are not: subject to undue influence or scare-tactics from family or friends, seeking advice because of the needs of others, or being conned out of money by those who might appear to have their best interests at heart.
Mortgage advisers’ soft skills
Part of the debate raging in the market at the moment is around the ability of mainstream mortgage advisers – who perhaps do not have these equity release-based skills – to provide this sort of advice, without being able to offer other, perhaps most suitable, products.
We have always been concerned that those who are not steeped in the equity release market might well treat older, and therefore potentially more vulnerable, clients as they would a mainstream borrower.
That’s really not the approach which works best.
Indeed, in equity release we have rules and regulations around independent legal advice and the fact that the adviser, while involving the family where necessary, may wish to see the client alone to ascertain their understanding of what they’re signing up to, and that they are clear on the responsibilities they have.
That doesn’t mean our sector is perfect, but perhaps does mean we are a little bit further down the road in terms of advisory firms recognising vulnerability and treating the client appropriately.
How to identify mental health issues
We could do more.
I’ve long been an advocate of a compulsory Legal Power of Attorney for every later life lending client, especially when it comes to drawdown products.
Without an LPA in place, it’s the client who will suffer further when they have the financial means at their disposal to potentially secure a better standard of living but are judged unable to make that decision.
Education and understanding of mental health problems and difficulties is a lot better, but firms might need to train advisers to recognise potential warning signs, and to ask questions that might illicit the true vulnerability of a client.
Plus things can change on a day-to-day basis. A client who seems completely in control and understanding of the situation at the first meeting might be very far from this the next time you meet.
This is therefore an ongoing situation that needs monitoring and firms should recognise this is not a one-and-done appraisal.
It will be interesting to see the proposals that come out of this FCA consultation.
One suspects that a large numbers of firms are going to have to change their approach, systems and processes to make sure they meet these new, undoubtedly higher, standards.
Lenders should prepare for spectre of rising arrears – Spicerhaart
At the time, it was too soon to say whether or not this was evidence of a reversal of the downward trend or a temporary fluctuation
But, over recent months, other factors have suggested that arrears may begin to rise again.
When you combine this with the fact that credit card debt is at record highs — with evidence that more and more people are relying on credit cards for everyday spending — we could be seeing the beginning of a more permanent trend.
Mortgage terms are now available up to 40 years, and people in their 50s, 60s and 70s can take out long- and medium-term mortgages.
While this fits with changing working lives, it could create a growing reliance on debt further into later life.
Significant downside risk
Earlier this month, the Association of Mortgage Intermediaries (AMI) announced that it believes mortgage arrears “present a significant downside risk over the coming years” and it has urged lenders to begin preparations.
It would be prudent for lenders to start to plan, with evidence suggesting that arrears and possessions are beginning to creep up, and AMI warning that changing employment dynamics, an ageing society and a steadily rising Bank Rate will have an impact.
AMI is concerned that the mortgage market is unprepared, particularly in a world where the execution-only model is being pushed and consumers are taking on additional borrowing without fully understanding the future financial consequences.
It’s clear that the mortgage market will need to shift to better serve consumers better.
But it needs to be careful not to allow history to repeat itself; where borrowers are allowed to take on mortgage debt that, realistically, they will never be able to clear.