Gender pensions gap: impact of divorce or bereavement on financial resilience – Wilson
But recent more2life research has highlighted a group that is at greater risk of turbulent economics and rising bills in later life; widows and divorcees.
Socio-economic changes are the only long-term solution to addressing this disparity, but advisers can play a vital role in raising awareness of the importance of holistic financial planning by adjusting conversations with clients in light of these findings.
The numbers are clear. Our research showed that not only do just a third of UK women (35 per cent) report they have independent pension wealth (whilst 40 per cent do not have any pension wealth whatsoever), 59 per cent of widows surveyed felt that they had lost out on retirement income following the death of their partner. This equals 1.5 million widows across the UK and stands in stark contrast to just 16 per cent of widowers who said the same.
For divorcees, a similar picture emerges: 39 per cent of women felt that they had lost out on the retirement income they receive or expect to receive as a result of splitting from their partner, compared to only 21 per cent of men. In a period of rising inflation and uncertainty around energy bills, if consumers are unprepared for the loss of income following a divorce or bereavement, they may struggle to manage household finances or afford monthly mortgage repayments.
What can advisers do to help bridge this gap?
As professionals on the front line of financial services, advisers are uniquely placed to help women, and men, plan for later life and understand the solutions available to them. Firstly, simply raising awareness that the gender pensions gap both exists, and is heightened for divorcees and widows, may help these groups better plan mortgage repayments and household bills in later life.
As part of a more holistic financial conversation, advisers should also consider and highlight the role that property wealth can play in helping to bridge any income gap. More women (27 per cent) than men (21 per cent) own property wealth, despite the gender pensions gap, showing how tapping into this property wealth may be key.
Equity release is one option and can even be used to complete mortgage repayments, consolidating the debt but securing a client’s forever home so they are more secure against rising bills.
In the unfortunate event of a bereavement or divorce, the last thing a client needs is to unwittingly fall through the cracks into this gender gap facing a future struggle to pay bills or meet mortgage payments. Advisers may be the first line of defence and need to consider all arrows in their client’s quiver to make up this shortfall.
Who will blink first on mortgage interest rates – Young
There’s no doubting the ultra-competitive nature of our market has provided a compelling opportunity for advisers and their clients.
Low rates have not just been confined to the residential market but within buy-to-let the same trend has persisted. However, what makes it even more interesting is this doesn’t chime at all with what has been happening to swap rates recently.
Take a look at SONIA (the Sterling Overnight Index Average) – a rate based on actual transactions and reflecting what banks are paying to borrow sterling overnight from other financial institutions and institutional investors.
Back at the end of July, five-year SONIA swaps were 0.42 per cent; on 12 October they had more than doubled to 0.88 per cent. It’s an even more graphic rise for two-year swaps over the same timescale, moving from 0.22 per cent to 0.71 per cent. In other words, everyone is paying considerably more for their money.
As you’ll no doubt be aware pricing has actually gone down during that period. When you consider just how many lenders use the credit markets to fund their mortgage lending, it seems somewhat odd.
Why hold or drop rates on your products when it’s costing you more to fund them and when you’ll be making even less margin?
It also justifiably begs the question, how long can what seems like a contradiction in the way our sector works continue and who will blink first when it comes to putting rates up? The traditional trend is that when one moves, others will follow.
As I write, lenders appear to have their eyes fully open in the buy-to-let space but are potentially beginning to blink in the residential market. Again, in mid-October, news was filtering through that NatWest and HSBC were about to inch up rates for higher loan to value borrowers.
The next big question is how will others react? Will the competition feel this presents an opportunity for them to secure volumes, even at less margin, because their competitors have repriced upwards. Or will they believe that they must follow as they fear being left as the last lender standing at a particular price point which means large levels of business that they’ll be unable to service effectively?
It is a quandary and one that I suspect buy-to-let lenders will also face in due course as well. Also, even though Bank Base Rate (BBR) is generally unrelated to mortgage product rates if the mood music begins to change and the Monetary Policy Committee ups BBR as it is expected to do before Christmas, then we could see an acceptance that this period of historically low rates has ended and a mass movement of rates.
For advisers, it presents an interesting conundrum in terms of the advice to be given especially over the next couple of months. The likelihood is that rates will still be relatively low after this but they won’t be as competitive as they currently are.
Remortgaging: Timing may not even matter this time – Hunt
It felt like an odd comment to make, given they work in the finance sector, they’ve always used an adviser and you’d think they were absolutely au fait with their mortgage product options and what they required.
So I asked what they meant. It turns out they are one of those fortunate borrowers that lenders appear to have been falling over themselves to get recently. Their next remortgage is below 60% LTV, and they’ve secured a below one per cent fixed-rate over five years.
In my friend’s mind, that feels like good business. However, they will also freely admit that securing this mortgage is way more to do with luck and timing, than any sort of judgement on their part.
It just so happens their current mortgage deal comes to an end next month, and because of this (and their situation) they’ve been able to secure this deal. In other words, they’ve got it right in the sense they’re in the right spot at the right time.
Previous remortgages haven’t felt like that. There was the option to go with a 5.25% fixed-rate just before the credit crunch and the subsequent decision by the MPC to cut rates. There was a decision a few years prior to that when they opted for a variable rate that tracked BBR – over the next two years the MPC steadily upped rates.
They were beginning to think that all remortgages might end up with them feeling slightly short-changed. But not this time and especially since the inflation figures have come through and there is much talk about an increase in BBR perhaps even before Christmas.
Grass is always greener
This experience got me thinking about what people who are not in this situation might currently feel. Those who perhaps remortgaged last year and are now seeing the ultra-competitive rates available and perhaps cursing their luck. Or those who pre-pandemic took out a five-year fixed-rate at levels far above what is available now. Or those who might not come to the end of their deal until sometime next year and might be wondering what rates will look like then?
Given how important the monthly mortgage payment is to so many people, we should not be surprised to see the level of interest there is in our market, to have people even now somewhat regretting the mortgage products they opted for years ago, and to perhaps be wondering whether their existing deal is still the right one for them, or if ultimately they can save money by moving. How good is that for advisers?
As an advisory community that is a groundswell of interest and engagement that few other sector professionals have the fortune to be able to tap into. To be able to actively communicate with both existing, and potential new, clients and to be able to talk to them about their options, even if they have only recently gone through the process.
Add in the fact our market can move incredibly quickly and it’s possible to see how far this can take you and the services and products you can provide. We should never underestimate just how important ‘the mortgage‘ is to everyone who has got one, or the deep-seated willingness to ‘shop around‘ in the anticipation of cutting those costs. It’s always a door worth pushing open to find out what’s inside.
Google fraud focus requires advice firm action – Stonebridge
So it’s no wonder that our regulator(s) are working to try and ensure ‘successful’ perpetrations of fraud are kept to an absolute minimum.
As a sector, over the past 18 months, we have effectively had to work remotely with our clients and this has provided the fraudsters with an extra incentive and avenue to pursue. If you never meet the adviser face-to-face, or indeed if you never meet the fraudulent customer face-to-face, then there is an increased chance of such activity taking place.
Part of what the regulator is trying to do is cut off fraud at source. There are countless examples, for instance, of fraudsters setting up fake firms, advertising via Google and social media, and drawing in customers in order to steal their money.
To that end, and this may be something firms are not fully aware of yet, Google has introduced a new measure to protect consumers and help prevent those scammers from exploiting its platforms.
Since the start of September, it has started to verify financial services firms who want to advertise on Google, including for both display and search results adverts. And, an important point for firms who rely on this advertising, until you secure that verification your advertising will be paused.
This will be the case for both existing advertisers and anyone who wants to advertise in the future. If you’re the former, you’ll only need to complete ID verification if Google sends a notification email and you have an activated account with them.
The steps required to verify may differ depending on the firm’s account and structure, the billing set-up, and if you are advertising on behalf of a firm or as an individual.
A guiding hand
However, this will also differ if you are part of a network like Stonebridge. Because we are the FCA-approved network, the requirements mean that the process needs to take place through us, rather than individually. As a result, we’ve had to put new processes in place to take our AR firms through the required steps and I suspect other networks will be in the same position.
It may take some time to secure that verification so if you’ve not heard from your network principal, we would advise you to get in touch with them, to see how they can help you secure the verification required to keep on advertising.
The other point to make is that one-time verification is unlikely to be the end of the matter. We hear that Google, for example, may be reviewing all financial services advertising accounts on a quarterly basis, and in all likelihood, this type of checking policy will spread to other digital advertising platforms.
You can fully understand the rationale for this as the damage from fraud can be devastating for all concerned. Advice firms are going to need to keep a close eye on the requirements and ARs will need to work closely with their networks in order to ensure ongoing verification to allow them to advertise their much-needed products and services.
Potential base rate hike calls for consideration of later life lending options – Wilson
Rising inflation is focusing the minds of many economists and policy makers, especially as the bank has already warned that it will rise to more than four per cent this winter, pushed higher by utility price increases and the cost of many staples going up.
For those on fixed incomes such as pensioners a rise in inflation is more difficult to cover. The recent ‘retirement living standards’ data from the Pension and Lifetime Savings Association shows an increased income requirement for those wanting each of the three living standard levels – minimum, moderate and comfortable.
Couples, for instance, will need an extra £2,200 per year to keep up a comfortable lifestyle. Again, when you’re on a fixed income where do you find the money to do this? And these are of course only averages, as someone in London is likely to need more income than someone in Penrith.
At the same time, we’re all aware that those retirees who own their homes are likely to have seen a significant increase in values over recent years, and there may be more openness to accessing the increased equity in order to fund lifestyle choices and to make retirement more comfortable.
Solving utility problems
It’s one of my major bugbears in this profession that we still, for example, see ‘energy poverty’ among retired homeowners when there are options to access that property’s value to deal with this.
Given what we are seeing in the wholesale gas markets, for example, and what has happened to a growing number of utility providers, it is plainly obvious that we’re all going to be paying more for our utility bills for some time to come.
Again, when you don’t have the opportunity to increase your income, where might you look in order to generate the money required?
I read a recent survey which suggested there is a reluctance among some older homeowners to consider equity release because they are worried about what their family members might say. They are concerned they won’t approve.
It’s why advisers often work with the client’s family to take them through the equity release journey along with the client. However, ultimately it is the client who will make the decision and, to my mind, if it’s the difference between ensuring that individual can have the money to cover their bills and to maintain if not improve improve their standard of living, then they should not be worried about seeking the approval of their relatives, friends or anyone else.
A rise in inflation may be temporary but it needs to be considered at least over the medium term.
Preparing for base rate changes
Indeed, policymaker action in this area – which is likely to mean an increase in interest rates to try and get inflation under control – is also going to have repercussions in terms of the rates of borrowing available.
Now may well be the best time for those older borrowers to consider accessing some of the product rates currently available.
Those who are not suitable for equity release might still want to look at either retirement interest-only (RIO) options or mortgages with a higher maximum age. If rates are likely to be raised – the market appears to be pricing in a base rate increase before Christmas – then the ultra-competitive rates we are currently seeing might start to inch up.
Overall, advisers are likely to be pushing at an open door in terms of older borrower requirements and how the retired on fixed incomes look to cover off these increases in costs.
The need to access funding is already there, and they may now be more willing to utilise their property – it is up to the advisory community to provide the right solutions for these needs.
Green low deposit mortgages will be high on the agenda – Bamford
While specific policy measures were short in supply, there was a general theme certainly from the Labour Party that it intends to give first-time buyers priority access to housing if it is elected, and that new-build developments in particular might be off limits to buy-to-let landlords or corporate investors.
The Conservative Party are unlikely to go that far but it’s clear they also see first-time buyers close to the front of the queue when it comes to securing affordable, new-build housing, and there is a very good reason why stamp duty remains at zero for the vast majority of first-time buyers.
All eyes will now be on the Budget at the end of this month to see if there are any further, specific measures to support first-time buyer activity, given Michael Gove recently highlighted ‘access to finance’ as being an issue within the housing market.
As we know, this is likely to mean access to high loan to value (LTV) finance. It has been positive to see the Deposit Unlock scheme beginning to take off, which will provide access to high LTV loans specifically for those purchasing new-build properties in certain developments.
Nationwide recently joined this scheme and is marrying up its new-build, high LTV mortgage and green-focused lending.
Borrowers who buy a new-build through the scheme will have access to its green reward product which offers a greater level of cashback if the property purchased hits a Standard Assessment Procedure (SAP) rating of 86+, which is equivalent to an EPC rating of a high B.
One can see this green focus being much more heavily pushed by both lenders and housing developers in the months and years to come because of the government’s carbon emissions targets. Clearly, housing stock plays a big part in this. There is encouragement to ensure new-builds meet the highest EPC ratings, for example, and that borrowers are rewarded for that with better priced products and greater levels of cashback.
We’ve already seen a growing number of lenders offering green products in both the residential and the buy-to-let space as the industry seeks to encourage homeowners to either purchase energy efficient homes or invest in upping that efficiency.
Let’s not underestimate how big that task is. It’s one thing to ensure all new-builds reach these standards, but it’s quite another to get that improvement among existing housing stock much of it dating back to Victorian Britain.
However, you have to start somewhere and new-build housing is a much easier win for all concerned. By marrying up high LTV with green rewards, we can ensure that first-timers at least are able to start their home-owning journey off at the top of the EPC charts saving them money on their energy bills in the long run.
Given what is happening in the utilities sector at the moment, who wouldn’t want to achieve that?
The Diversity and Inclusion Finance Forum 2021 ‒ a year in review
I’ve been rocked back on my heels many times, stunned by the powerful messages from all of our speakers. It’s been uncomfortable listening at times but the attempt to learn and grow often is. The revelation that education isn’t enough to change the world was a big one for me. We need to see and act through a united effort to bring about radical change – a much more complex affair involving direct action.
I’d like to single out the attendees this year whose exceptional contributions made many of the discussions as valuable as the presentations – a big thank you to you. Comments made from personal experience are as hard-hitting as any research and as memorable.
Another thing we learnt this year is that history is critical to understanding the present. DIFF emerged from a women’s executive group involving some of the best and the brightest women in the mortgage industry, driving a need for change and the recognition that you need to be able to bring ‘your whole self’ to work. DIFF has grasped the baton, broadening that message and formalising our determination to mark out real change for all in this industry.
This was just the beginning.
We look forward to seeing you all again next year.
DIFF 20-21 Review and learnings
How to embed diversity and inclusion in the workplace
Frank Starling, (pictured) founder and chief executive of consultancy Variety Pack guided our audience through a workshop like no other, detailing the discomfort, allyship and determination needed to imprint permanent change
Five session takeaways
• Get ready to be uncomfortable and create spaces for difficult conversations where people can talk without fear of judgement or attack
• Be disruptive and challenging to examine both our own privilege and understand how we exclude others
• Challenge hiring practices and shortlists to overturn institutional bias
• Choose to be an ally and live a life where you dismantle racism
• Think about how to hear and listen to the opinions of other employees and create actionable points for change
Full event coverage in Mortgage Solutions
The relevance of the past in challenging and overturning racism
At the first event of the year, DIFF attendees joined us for two electrifying events led by speakers Sable Lomax (pictured) from Fearless Futures and Damien Thompson from Aldermore and Lloyds Banking Group’s Jasjyot Singh. The battle to understand the dimensions of the racism problem in the UK begins with recognising where it came from and how far there is to go before we even get out of the starting blocks
Five session takeaways
• Living in constant fear has undermined generations. Only systemic restructuring will make a difference on racism, not pushing individuals into the limelight
• It is a lifelong process to discover and overturn your in-built privileges when the world has been designed for you
• Expect the ‘what about me?’ argument because those with privilege don’t always know they have it
• Forcing diversity and fighting racism involves six business-led steps: Recognising the problem, addressing it and finding solutions, implementation, monitoring agreed targets and reviewing progress
• If you search for and hire people with ‘contrarian’ perspectives, you will end up with a more diverse workforce
Mortgage Solutions’ coverage of the executive event
Mortgage Solutions’ coverage of the Leaders event
Deep-diving history will create a better future
British convention and traditions play into both the modern recruitment process in the mortgage industry and the fact many of the Black Lives Matter protests became focused on historical people and events. Examining and disrupting the origins of those conventions is the best way to create a different world, as highlighted by all our speakers, Pete Gwilliam, owner of mortgage sector headhunter Vitus Search and CEO of Sesame Bankhall, Michele Golunska, with special thanks to historian David Olusoga (pictured).
Five session takeaways
• Disrupt the recruitment process by downplaying traditional work histories and assess candidates on what they would do instead of have done
• Examine company culture and set quotas to create diversity
• Conduct exit interviews and wider analysis to uncover the reasons employees don’t stay long at your company
• Understand that British Banks predominantly lent the mortgages to buy the land and slaves in the deep south in the United States and other traditions such as tea drinking from China cups emerged from our colonial past
• The UK government has sidestepped the issue, but financial reparations could become an option for organisations to make amends and address inequalities in society
Mortgage Solutions’ coverage of the executive event
Mortgage Solutions’ coverage of the Leaders event
Covid, the ‘she-cession’ and the pandemic’s disproportionate impact on working women
The pandemic has left a painful aftermath for many and sadly, women are also once again likely to emerge the financial losers. Many thanks to all three of our speakers on these hard-hitting sessions: Felicia Willow, interim CEO, gender equality charity The Fawcett Society (pictured), Denise Fowler, CEO, Women’s Pioneer Housing and Julie Budge, CEO, My Sister’s House Women’s Centre.
Five event takeaways
• Unequal pay and part-time employment are the foundations of gender inequality at work. Mortgage lenders must reassess affordability checks to guard against financial discrimination
• Visibility is key when it comes to pay increases and promotions, so hybrid working from home arrangements are likely to undermine equality efforts further. Guard against this
• Salary secrecy contributes to unequal pay so be explicit on pay when recruiting
• Our speaker warned employers not automatically target those on furlough for redundancy because that would overwhelmingly hit women
• Every organisation should have a trained individual able to signpost toward immediate help if a victim of domestic abuse asks for support
Coverage of both the Leadership and the Executive events
‘Levelling up’ the house buying process should remain a government priority – Rudolf
From the Ministry of Housing, Communities & Local Government (MHCLG) we have now shifted to the Department for Levelling up Housing & Communities (DLUHC). While it is positive to see housing retaining its prominence, some might wonder whether the priority for Michael Gove will be in that order, starting with ‘levelling up’.
There’s no doubt that within the civil service the faces tend to remain the same, which is clearly a positive in our ongoing work to tangibly improve the home buying and selling process, however a new secretary of state is always going to have their own stamp to put on the job. And as mentioned, we await to see to what extent it will be ‘levelling up’ that takes the lion’s share of his focus.
We at the Conveyancing Association (CA) have already written to Mr Gove inviting him to speak at our December conference. We seek to meet in order to get a clear idea whether he, and the government, will continue to prioritise making the improvements to the home buying process that we all want to see, and which the CA has lobbied extensively for.
For us, that ongoing commitment from the government will be vital and we are positive all those concerned will continue to see how important the housing market is to the UK, and the huge efficiency gains that could be delivered by cutting down significantly on the time it takes to complete a property purchase.
It feels like a ‘win-win’ already to continue to pursue this important agenda, especially given the progress that has been made, although admittedly there are plenty of other housing-related issues to be tackled and ‘made good’. Not least the obvious ones around cladding, helping existing leaseholders, shifting to a fairer commonhold system, and helping more young people onto the housing ladder.
It is early days of course but we do have some initial crumbs of what might be priority areas. Mr. Gove, speaking at a fringe event at the Conservative Party Conference, specifically picked out social housing provision as one area he feels requires action.
He called the “quality of social housing, particularly in some parts of the country, [as being] scandalously poor”, talking about overcrowded conditions, damp, “and other factors which hold back the flourishing of the children and the families who are raised in those homes”.
The improvement of social housing looks very much part of the ‘levelling up’ agenda then, not forgetting the fact the government has committed to building 300,000 new homes by the mid-2020s.
Mr Gove also talked about “resolving the housing problem” in order for families to have a stake in their future, to help deliver social housing and was also quick to mention “access to finance”. All this might suggest a continued focus on affordable housing and supporting first-time buyers via existing, and perhaps new, government schemes.
What we also know is that Mr Gove has a reputation for ‘getting things done’.
This is unlikely to be a government department which sits back and waits, which is why it is so important that our sector continues to have the ear of this administration and that we put forward tangible solutions as well as a timetable of when they can and should be delivered.
It’s also important we hold the government to account for announcements it has already made, most notably around leasehold reform, but not yet delivered the legislation for.
We are a long way down the road to positive reform in so many areas, but there is still much to do. It’s unlikely that this new broom will sweep entirely clean, but we should not rule out some change of priorities, and we must be prepared to fight our corner to keep the focus on those areas which we believe need to change in order to get the housing market we want.
Let’s drop the term ‘down valuation’ and unify the industry – Baguley
So let’s tackle this head on. In my opinion, there is no such thing as a down valuation and, speaking from my own experience of sitting on both sides of the fence, never has an employer asked its valuer team to pull back on its valuation figures.
Quickly changing markets – both rising and falling – present challenges, expectation and reality in terms of house prices which may or may not be met.
These changing conditions create collisions, and collision is the driving force behind the down valuation narrative which has once again appeared. But just to repeat, there is no such thing as a down valuation.
This is simply a difference in opinion over what a particular asset is worth. There are no deeper or more sinister connotations than that. Values are temporarily buoyed by optimistic selling figures or enthusiastic buyers. They then receive valuation advice which is carried out for the benefit of the lender that sometimes fails to match expectations.
Two sides of the industry
Within this process it often seems like agents are being pitted against valuers. But let’s take a step back here.
Both are essentially two sides of the same coin and both are involved in the buying and selling of residential property. Interestingly we track our valuers’ valuations compared to the declared asking price or given assessment of value at the time of instruction.
Unsurprisingly, there is a resetting of expectations in terms of where the market value lands compared to the initial figure but the percentage of cases where this happens – either above or below the stated figure – is significantly lower than recent articles would suggest. The facts are not supporting the narrative.
So, let’s just drop the term down valuation altogether. As an industry, we need to be more closely aligned in the way we look at and advise on property. It is in the best interests of the client and after all it is the client for whom we act.
Market value is an internationally recognised valuation definition, and any deviation from that at the marketing stage will only lead to a difference in opinion further down the line.
To do this, we need to ensure that the lines of communication remain open.
Agents need to present why they believe valuations may differ, whilst being mindful of the valuation process and the evidence provided by previous completions. The more evidence we have to tell the story and build a more accurate picture, the better for all concerned.
Being at loggerheads and raising the down valuation excuse helps nobody, and this this applies to valuers as much as agents.
Periods of pressure pose opportunity to spot operational weak spots – Paragon
Of course, many sectors have already felt this, notably supermarkets, and we’re in for a frugal Christmas if the experts are to be believed. However, your local supermarket running out of avocados is mildly irritating, not being able to get to work or a medical appointment is more serious.
Record levels of demand at a time of constrained operational capacity is something the mortgage industry has been experiencing since the housing market reopened in May last year, with pinch points particularly felt in March, June and the end of September as the stamp duty holiday hit its key deadlines.
Underwriting mortgages is not digging holes. You cannot simply employ more people to deal with strong business levels; roles such as underwriting require specialist training and that takes time, making it a challenge to flex.
It’s an issue we were conscious of and made sure we were operationally ready to cope with the peaks, as did our peers. On the whole, the industry has fared well and service levels have largely held up.
An unexpected positive of the past year is that it has enabled us to kick the tyres of our operations and see where we can improve. If you pass water through a pipe with enough pressure, it will test the weak points and spring a leak. The strong business levels of the past 12 months have been challenging but we haven’t wasted the opportunity.
During the pandemic we engaged with brokers to find out how we could best support them. Lack of product availability, frequent criteria changes and poor service levels were common frustrations. Product availability is now back to pre-pandemic levels and more certainty in the market means lending criteria is less constrictive and changes far fewer.
So, the question is how can we improve service? We are doing this in a number of ways, one of which is using technology to streamline our processes.
As a specialist lender, we’ve always been proud of our approach that emphasises the expertise of our staff to find solutions in some of the most complex of cases, so we’re careful not to commoditise this.
We know that a simple conversation with the right person can quickly get a tricky application moving in the right direction. Lenders shouldn’t replace real people picking up the phones with technology anytime soon but investment in the right systems can equip our people, not replace them.
We are working towards using technology to support them to do their jobs more efficiently, to make decisions more effectively. This is using AI, not automation, to do the heavy lifting and using our people to add value.
We have some exciting plans over the next two years and I’m looking forward to updating you all as we progress on this journey.