QHow can you justify your current standard variable rate (SVR), 7.69% being so much higher than Halifax’s 6.5%?

It is a question that I get asked a lot. There tends to be some confusion around SVR, so I am happy to try to clear it up. At Bank of Scotland, we have our own distinct brand, products team and customers. Although we are part of the overall group, we still to all intents and purposes operate as a separate brand. For example, at Bank of Scotland Intermediaries, a large part of our business is based on specialist as opposed to mainstream lending.

Bank of Scotland Intermediaries makes its own decision on its SVR by considering all of these things. When you consider it in this context, it is just the same as posing the question – why has Abbey got a different SVR from HSBC? We have also borne in mind that the vast majority of our customers are now on fixed or tracker products. Also, that most of our SVR customers have low outstanding balances.

QPreviously, when my clients who were contractors applied for a mortgage with you, you could use their gross contractor rate to calculate affordability, as opposed to studying their accounts. Following Halifax’s return to this system, do you have any plans to reintroduce this kind of affordability calculations?

With the exception of some minor variances, our approach to affordability and the model we use is similar to that of our sister company, Halifax. The only change that I can think of that recently impacted contractors specifically related to IT freelancers. These kinds of things are always being tweaked and are under constant review.

QAs HBOS has positioned Bank of Scotland as its large loans lender, why do you only loan up to £1m on some products when Halifax will offer up to £7.5m on some schemes?

This is a misleading question. Halifax is a mainstream mortgage lender. Bank Of Scotland Intermediaries, as a mainstream and large loans provider, lends up to £10m. The only differences occur with specific schemes such as buy-to-let, where we will lend £10m to one customer across the specialist lending brands.

At Bank of Scotland Intermediaries, we pride ourselves on staying very close to the intermediary market and listening to its specific needs. More often than not it is tweaks to a proposition – as opposed to radical inventions – which make a broker’s life easier. We have recently increased the loan-to-value on self-certification to 90%.

QWith the self-certification market coming under increased pressure from lenders offering fast-track options, what do you see as the future for this sector? Do you have any plans to amend your self-certification criteria to make the products more competitive?

I think there is no doubt that at the 75% loan-to-value (LTV) level, self-certification is declining. Underwriting is getting more and more sophisticated, and for Pay As You Earn (PAYE) customers especially there are opportunities to secure a mainstream deal, whereas before that might not have been possible.

However, there is still a significant market for self-certification self-employed customers. This area is a big opportunity for Bank of Scotland. In terms of self-certification product developments, we have recently raised our LTV level to 90% and made that available to the whole of market. This is in direct response to intermediary feedback.

QFollowing BM Solutions’ change of rental cover to using payrates, and offering cascade rental covers, what plans do you have to follow suit? Will there be a point when you offer payrate rental cover on all your buy-to-let products? Will your stated plans to focus more on your buy to let offering conflict at all with BM Solutions remit?

We recently launched payrate buy-to-let products with just 100% rental cover. We expect these products to really take off and to establish our position as one of the main buy-to-let players in the marketplace. All of these changes have been influenced by the needs of brokers, via our 55-strong business development manager (BDM) sales force. As the market changes, we will no doubt be looking to launch more products to maintain a competitive position.

Each of the five HBOS mortgage brands has a distinct focus in each of their key markets. From time to time there will be overlap, but overall we each have our own core focus. I think over time, it will become clearer.

QYou announced recently you were considering offering your Personal Choice drawdown facility to landlords. Given that some commentators have highlighted signs of distress in the buy to let market recently, would there not be risks involved in offering landlords a carte blanche to borrow?

In 2008, Personal Choice is definitely something that we would like to expand across our range. It is not a mass-market product. It is for sophisticated borrowers and is, as you would expect, tightly underwritten. To put the buy-to-let market into context, the average age of a buy-to-let borrower is close to 40 and the average income tops £40,000 per year.

Many of our borrowers also have upwards of a 30% deposit to put down on their buy-to-let property. These borrowers are looking to stay in the market for upwards of 15 years. Therefore, it should not be a surprise that buy-to-let arrears are performing way ahead of expectations.

Increasing interest rates, although uncomfortable for many borrowers, have been flagged well in advance. Commentators should not forget that buy-to-let is underpinned by strong fundamentals. Many people now choose renting as a life choice, along with those who are renting out of necessity. Both things combine to create a robust market. n